Think your FICO credit score is out of your control? Guess again. Sure, you’ve made mistakes in your financial past. But, if you pay off debt or fix bad information, the improvements will show up on your credit report within 30 to 45 days, says Andrew Sprauve, a FICO spokesman. Other problems, such as bankruptcy or foreclosure, hurt your score for seven to 10 years. In general, the fastest ways to get results come down to changing bad habits and developing good ones.
Get a free copy of your credit report and comb it for errors. Look for late payments that weren't really late, and check open accounts to ensure they show you owing what you think you owe. Fight errors in writing with the credit bureau that gave you the report. It could take 60 to 90 days for the agency to answer you, but fixes appear in your report within a month or so. If a bank lists a lower credit card limit than you actually have, ask the lender to fix the details. If you have just one late payment with a creditor, and you've otherwise been a good customer, ask the company in writing to delete the past-due payment from your account. If you have a history of late bills but you've made your last 12 payments on time, ask the lender to update your account so the past troubles drop from your report.
You also need to look for accounts listed as charged off (uncollected) or settled (partially paid), after you paid on time and in full, and accounts listed as unpaid if bankruptcy wiped them out. What's not worth fixing? Misspelled names, incorrect addresses, closed accounts listed as open and outdated employer information.
Building a bigger and better credit history can improve your FICO score within weeks or months. If you don't already have a credit card, get one, but be careful how you use that plastic. Part of your credit score comes from how close to your limit your balance is. Carrying a balance of more than half of your limit will hurt your score. If you have an installment loan, something like a car loan with regular monthly payments, that can help your score. Also, keep old credit cards active. Your odds of good deals from lenders increase when they see you have a long and positive credit history. The trick here is some banks may close accounts if there's no action on the card at all. Your best move is to make small purchases on the old card from time to time, and pay it off immediately.
Older stuff on your credit report counts less than newer information, so managing your finances pays off the longer you act responsibly. Lenders like to see at least a year's worth of on-time payments. Paying even a few days late can affect your FICO score. Set up automatic payments for fixed costs such as rent, or enroll in your bank's bill-pay program for regular payment reminders. And you have to cut your debt. Give yourself a cash allowance and stop using credit cards. Create a monthly payment plan to slash balances on all of your plastic, starting with extra payments toward the account with the highest interest rate. Once you've paid down credit cards, keep balances below 30 percent of your limit. Also, don't open several new accounts at once, or you'll end up with a lower account age and a lower FICO score.
What Doesn't Work
Closing accounts or unused credit cards doesn't remove them from your credit report. It can actually lower your score, especially if closing the accounts reduces your overall debt limit. Nor does paying off a collection account help. Collections stay on your report for seven years. Moving balances from one credit card to another won't do it, either. Owing the same amount but having fewer open accounts could drop your score. Also, any sudden flurry of credit activity raises your risk profile. Applying for new plastic to increase your available credit could actually hurt your FICO score.
- MyFICO: How to Repair Your Credit and Improve Your FICO Credit Score
- MSN Money: 9 Fast Fixes for Your Credit Scores
- Anthony Sprauve; Spokesman; FICO; San Francisco, California (415-491-5235)
- Burke/Triolo Productions/Brand X Pictures/Getty Images
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