2008 Year in Review

How Can I Improve My Credit Score?

Angie VanderVinne

One of the most frequently asked questions I got as a lender and that I now get as a Money Coach, is how can I improve my credit score? The easiest and most obvious answer to that question is to pay on time your credit card bills, utility bills (many utilities now report past dues), medical bills, loan payments, and mortgage loan payments. The more difficult answer for people to handle is allow time to pass while making payments on time. From a lender’s perspective, they want at least 12 months of on time payments to show evidence of a good effort to change your bad payment habits.

The other question I get is what comprises a credit score? There are three different credit reporting agencies with different credit scoring formulas. Additionally, no one exactly knows the exact calculation of these scores, and scores can differ greatly by reporting agency. FICO scores, created by the Fair Isaac firm, are used often by mortgage lenders. The FICO score calculates your score based on five factors: payment history, amount owed (including percentage of available credit you are using), length of credit history, new credit, and types of credit used. The “amount owed” component makes up nearly one-third of your score.

Lastly, insurance companies factor in your credit score, when determining your insurance rate. If you have some blips on your credit, but have a strong asset base (savings, property equity, etc), check to see if your insurance agent can manually underwrite your insurance. You could possibly qualify for a lower rate. The moral of this article is pay all of your bills and debts on time and don’t max out your credit. As a result your credit score should be just fine.

by  Editor, theCity1.com
August 11, 2008