How To Raise Your Credit Score
Credit scoring is a method lenders use to make lending decisions. Your credit score is a numeric value based on the information in your credit report. It tells lenders how likely you are to repay loans and credit card bills on time. It affects whether you can get credit and how much you pay for that credit. In general, the higher your credit score, the more likely you are to be approved and to pay a lower interest rate on new credit, reports the Michigan Association of CPAs.
To determine your credit score, most lenders use a system developed by Fair Isaac Corporation. The system uses five factors to arrive at your credit score. Each factor counts as a percentage of your total FICO score: payment history (35%); how much you owe (30%); the length of your credit history (15%); new credit (10%); and other factors, such as having a mix of credit types in your credit report (10%).
CHECK YOUR CREDIT SCORE
FICO scores typically range from 300 to 850. Most lenders consider scores of above 700 as good. If you would like to know your credit score, contact the Fair Isaac Corporation at www.myfico.com or by calling 1-800-342-6726. You may also order your credit score from the Annual Credit Report Service at www.annualcreditreport.com or 1-877-322-8228. Whichever you choose, there is a small fee involved. If your credit score is lower than you would like, CPAs suggest you take the following steps to build up your score.
PAY ALL BILLS ON TIME
One of the best ways to improve your credit score is simply to pay your bills on time. Late payments lower your credit score. Since your credit score changes as new information is reported by creditors, you can improve your score by catching up on back payments and staying current. Although late payments generally remain on your report for seven years, as time passes, and your payment habits improve, those late payments will have less of an impact.
KEEP BALANCES LOW
High outstanding balances on credit cards and other debt can lower your score