How can I raise my FICO score?

What is FICO Credit Score?

FICO is the credit score system used by most creditors today. It is useful in directing applications to specific loan programs and to set levels of underwriting. FICO score is widely used because it is objective, consistent, accurate and fast. Your 3 digit FICO score will determine what interest rate you will pay on your credit cards, mortgages, and auto loans.

FICO scores were developed by Fair Isaac Company, Inc. for each of the major credit bureaus. The scores are: (Equifax) Beacon, (Experian formerly TRW) Experian/FICO and (Trans Union) Empirica. They are simply credit scores that only consider the information contained in a person's credit file; they do not consider a persons income, savings or amount of a down payment for a mortgage or auto loan.

Your score may be different at each of the three main credit reporting agencies. The FICO score from each credit reporting agency considers only the data in your credit report at that agency. If your current scores from the three credit reporting agencies are different, it's probably because the information those agencies have on you differs. But no score says whether a specific individual will be a good or bad customer. While many lenders use FICO scores to help them make lending decisions, each lender has its own strategy, including the level of risk it finds acceptable for a given credit product. There is no single cutoff score used by all lenders. FICO score is based on the information in your credit report located at that particular credit bureau. The actual scoring process is proprietary, and the algorithms are copyrighted. A score is determined by summarizing a number of factors in your credit report. Order your credit report now! Free Online Credit Report

How Are FICO Scores Calculated?

Approximations;

15% of your score is based on the length of your credit history.
Typically a longer credit history will increase your score. The score considers both the age of your oldest account and an average age of all your accounts.

10% of your score is based on new credit or if you are taking on new debt.
Opening a couple of new credit lines in a short period will hurt this score. If you are planning on buying real estate in the near future, put off buying a car until after it closes. A new car loan can have a big impact on what price of house you can qualify for.

10% of your score is based on types of credit in use.
The score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans.

30% of your score is based on amounts owed on all accounts.
Even if you pay off your credit cards in full every month, your credit report may show a balance on those cards. The total balance on your last statement is generally the amount that will show in your credit report. The score considers the amount you owe on specific types of accounts, such as credit cards and installment loans. Small balances without missing a payment shows that you have managed credit responsibly, and may be slightly better than no balance at all. Closing unused credit accounts that show zero balances and that are in good standing will not generally raise your score. A large number of accounts can indicate higher risk of over-extension.

35% of your score is based on payment history.
The first thing any lender would want to know is whether you have paid past credit accounts on time. This is also one of the most important factors though late payments are not an automatic score-killer. An overall good credit picture can outweigh one or two instances of, say, late credit card payments.

Negative Information:

Negative information in your credit report that could impact the FICO score includes bankruptcies, delinquencies or late payments on accounts, collections, too many credit lines with maximum available funds borrowed, too little credit history (less than five credit lines in the past two years), and too many credit report inquiries.

Information FICO Does Not Consider:

FICO does not consider your race, color, religion, national origin, sex, sexual orientation, marital status or age.

How to Raise Your Credit Score

To raise your FICO credit score you need to be vigilant on your credit report and score by keeping updated and removing any errors. In addition, try to add positive information and not to add any negative information. If there's negative information such as late payments, try add explanation on your credit report.

Review your credit report and score
Improve factors noted as reason codes on your credit score analysis report .
Correct errors on your credit report.
Add information showing stability.
Avoid unnecessary inquiries.
Build an excellent payment history
Monitor your credit report

Beginning the first quarter of 1998, FICO models treat all inquiries occurring within a 14-day period as one inquiry. In addition, most models will ignore all auto-and mortgage-related inquires that occur within a 30-day period before calculating your score.

Reason Codes

When a lender receives your credit score, it includes score reason codes to explain the top reasons your score was not higher. These codes can give you an idea of how you should start improving your score, such as closing unused credit accounts or being more diligent about making payments on time.

Lenders are not required to tell you your credit score, but if your score is low and you are turned down for a loan, the lender must give you the reasons for your low score. Your score is accompanied by a maximum of four Reason Codes that explain why your score wasn't higher, listed in order of impact on the score. These codes are essential in helping you improve your score later in time.

FICO reason codes show how many aspects of your credit report are used in a FICO score. Your four reason codes would be from this list:

Amount owed on accounts is too high;

Delinquency on accounts;

Too few bank revolving accounts;

Too many bank or national revolving accounts;

Too many accounts with balances;

Consumer finance accounts;

Account payment history is too new to rate;

Too many inquiries in last 12 months;

Too many accounts opened in last 12 months;

Proportion of balances to credit limits is too high;

Amount owed on revolving accounts is too high;

Length of revolving credit history is too short;

Time since delinquent is too recent or unknown;

Length of credit history is too short;

Lack of recent bank revolving account information;

No recent non-mortgage balance information;

Number of accounts with delinquency;

Too few accounts currently paid as agreed;

Time since derogatory public record or collection;

Amount past due on accounts;

Serious delinquency, derogatory public record or collection;

Too many bank or national revolving accounts with balances;

No recent revolving balances;

Proportion of loan balances to loan amounts is too high;

Lack of recent installment loan information;

Date of last inquiry too recent;

Time since last account opening is too short;

Number of revolving accounts;

Number of bank revolving or revolving accounts;

Number of established accounts;

No recent bankcard balances;

Too few accounts with recent payment information.

Why Should you get your credit score?

When you order your own personal credit report, you can see the same credit history a lender sees, but a score can tell you more. It tells you how the lender is likely to evaluate your history.

If you want to get an idea of your total credit picture, having your credit score as well as your credit report can help you in several ways:

Know where you stand before applying for credit
Prevent surprises when applying for credit by knowing where you stand

Understand your total credit picture
This is important because lenders often review both your credit report and a credit score when considering an application.

Check Your Credit/ FICO score

For years now, customers have been barred from ever seeing their FICO scores and the method whereby their FICO scores were obtained. But after many years of pressure by consumers and legislators, now you will not only be able to obtain your FICO score from your loan officer, but you will also be able to go on-line and find out the specific factors that are affecting your score. Order your credit report now!
Free Online Credit Report

Reminder

Remember that the lender, not a credit score, makes the final decision to approve a mortgage loan application. A credit score is simply a tool used by the lender. The lender may take into consideration any special reasons for your past credit problems. In addition the lender will look at more than just your credit score such as your equity investment in the home, job history, income, savings, and the type of mortgage loan you want -- before making a final decision.

What is considered to be a good fico score?

Lenders criterion vary. There is no exact line of good to bad. Below is a general guide as to what some lenders may consider good, bad or acceptable. Keep in mind this is not a hard fast rule, lending policies are up to individual credit grantors.

FICO Score	Credit Rating
Above 730	Excellent Credit
700 - 729	Very Good Credit
670 - 699	Good credit
600 - 669	Fair credit
550 - 599	High risk
515 - 549	Limited credit availability
Below 515	Pay cash (Bad credit)

How does FICO relate to Mortgage rates?

A general guide to what you might expect from typical FICO score correlation. Results may vary depending on a particular lenders policies, market rates, employment, etc...

FICO Score

Typical Mortgage Rates

720 - 850

5.72%

700 - 719

5.85%

675 - 699

6.39%

620 - 674

7.54%

560 - 619

8.53%

500 - 559

9.29%

How can I fix my credit report and raise my FICO?

Order your credit report. Check it for inaccuracies. Inaccuracies could be, incorrect information, wrong dated information, other peoples information on your credit report, or paid accounts that are not properly recorded. . If you find inaccuracies write, call or online challenge the listing. The credit bureau has thirty days to respond or they must remove the listing. Checkout the FTC website for more info. Federal Trade Commission Home