How to Pump Up Your Credit Score

by on June 4, 2012

Many lenders have tightened their mortgage requirements, to prevent another real estate bubble from occurring.  According to a report by the Federal Reserve, a majority of banks are less likely to offer loans to people with a FICO score of 620 and a 10 percent down payment than they were in 2006.  Lenders were also less likely to do so even for those with a score of 720.

The good news is that there are some tactics that consumers can employ to raise their credit scores and become more pro-active with their finances.

  • First, it is worth noting that median credit scores are rising, as people reduce debt and spend less in tight economic times.  Some 18 percent of Americans now have scores of 800 to 850, while 15 percent are below 550, according to recent FICO data.
  • Often lenders will review FICO scores from the three big credit agencies, and they use the middle number to evaluate the borrower.  That number becomes the borrower’s “risk number.”
  • Borrowers can figure out their risk number by obtaining their three credit reports, available free once a year at, and studying them carefully for errors or omissions.
  • According to FICO, the two biggest factors in a credit score are payment history, which accounts for 35 percent of the score, and the amounts owed, accounting for 30 percent.
  • Knowing that information, one can raise his/her credit score by reducing balances on credit cards.  However, if an account is in collection, it is too late to improve the credit score by paying it off.  The notation that an account is in collection is what lowers the score, so consumers may get more mileage by paying down active credit-card balances and other debts first.
  • Though mistakes and bankruptcies may stay on a credit report for seven years, lenders will generally be more likely to overlook late payments that happened two or more years ago than more recent ones.
  • Improving one’s credit score could take three to four months, or it could take as long as 18 months.

Getting with your financial adviser can help you choose the strategy that’s right for you.

One simple thing you can do is to take one card and make the minimum payment, plus $100. Pay that one off and then take to total amount that you were paying on that card and add it to the next one. For example, let’s say you were paying $50 minimum, plus $100 and you paid that card off in 9 months. Then the next card has a $50 minimum, so you pay that PLUS the $150 you were paying on the first card. Move to a third card and pay the minimum plus $200 and as you can see, you will quickly have all your cards paid off.

Good luck improving your credit score.

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