Many people ask, how do I improve my FICO score and what is a FICO score anyway? Two very important questions for those looking to buy a home or who are at least curious about bettering their credit. Improving your FICO score — otherwise known as a credit score — takes time and effort, just like anything else in this world. In this post, we will explain a little about FICO scores, tips for improving it, and useful tools to help you keep track of your credit score.
What exactly is a FICO Score?
The FICO score is a credit score. It includes a combination of all the information found in your credit report. That includes information from the 3 major reporting bureaus.
Your FICO score is made up of the following:
Payment History: 35% of your overall FICO
Total Amounts Owed: 30%of your overall FICO
Length of Credit History: 15% of your overall FICO
New Credit: 10% of your overall FICO
Type of Credit in Use: 10% of your overall FICO
To find out what is impacting your FICO score you will want to review your credit reports.
Tips for Improving a FICO Score
There are multiple factors that way on your credit score and some way heavier than others. The tools we are going to share in this post will help you understand what those factors are. Here are a few tips to get you started:
- Check Your Credit Reports: Fixing errors in your credit report can give you the most immediate score boost.
- Pay Your Bills on Time: This one has a High Impact and should be taken seriously.
- Keep Balances Low: They call this your “Utilization Score” and this factor ways heavy as well
- Build Up Credit History: To create a good credit history, you’ll need to have open lines of credit that you use and pay off responsibly each month.
- Pay off any Old Debts: If you owe money to the debt collectors, you better believe anyone you try to get a loan from will know about that debt. Take care of these items.
What tools can help you track your FICO Score?
This information used to be a whole lot harder to get a hold of, but times have changed and the internet has opened the door to so many awesome tools. Many banks and credit cards now offer FICO scores as a Dashboard option within your online account. They run the score every quarter on most bank sites, but this could vary. There is also the universal way of getting your yearly scores, and that is by obtaining a free copy of your credit report from each of the three main credit reporting agencies — Equifax, TransUnion, and Experian — at www.annualcreditreport.com.
Then there are the online sites like Credit Karma which give you free access to your credit scores, reports and monitoring. Once you know where you stand, they help you figure out your next move. Maybe you need to dispute an error on your credit report. They could help with that. Maybe you’re paying too much in interest. They could help with that too. As you can see there are many new options available to monitor your FICO score so that the credit score improvement process can begin.
FICO Score Final Thoughts
Now that you know a little more than you did 5 minutes ago, what are you going to do with your newly acquired knowledge? Are you going to use this knowledge to better your odds of getting approved for a credit card? Are you thinking of buying a new car and you need to improve some things first? Maybe you are ready to buy that first home, and you are trying to make sure it’s feasible. Whatever the case, we hope this information was helpful and ask that you reach out to us with any questions.
If you think you are ready for home ownership, contact Teresa Parker, Loan Officer at Cunningham & Company Mortgage Bankers, NMLS # 2024 at (919) 697-2598 or [email protected]. She can help you decide if it makes financial sense, and how to get started.
Cunningham Mortgage & Real Estate Experts are partners. We help you find the home of your dreams and help you navigate through the home buying process and Cunningham Mortgage expertly helps you through the complicated lending process.
You may also want to read the following related posts: Home Loan Preapproval vs. Home Loan Prequalification, Renting vs Buying – Which Is Better For You?, or Which Home Loans Are The Best?