A high FICO score can unlock many doors for consumers, including the doors to low mortgage interest rates, attractive credit card offers, and zero-interest car loans. A low FICO score, however, keeps many of those entrances locked and creates a far more expensive borrowing experience. To improve a credit score and gain access to all the benefits afforded, borrowers can try these steps.
Over one-third of a FICO score is determined by a borrower’s compliance (or lack thereof) with payment due dates. Thus, when a creditor pays a bill late, it is reported to the credit bureaus and can have a devastating impact on a credit score. Paying bills early and maintaining automatic bill pay through a bank can help ensure consistent, timely payments and remove the risk of garnering a low score due to late payments.
Credit utilization is an important metric in determining one’s FICO score. The lower a borrower’s utilization of their available credit, the better their FICO score will be. Borrowers must control their spending and avoid closing out each month with their credit card balances creeping up toward their limits.
Having a variety of open accounts can (when done strategically) be good for a FICO score. For example, having a mix of credit cards and other loans can help raise a FICO score more than only having a mortgage. Opening too many accounts or too many accounts during a short period, however, can hurt a FICO score. Borrowers can avoid this by taking a deliberate approach to account opening. They can also ensure that they do interest rate searches within a short period so that FICO can tell that it is a search for a single loan rather than multiple loans.
Poor debt management may certainly be the cause of a low FICO score, but so too can an inaccurate account reporting. Borrowers should routinely check their full credit reports from each of the credit reporting bureaus to ensure the accuracy of everything appearing therein. When identifying an error, borrowers can dispute the report generally through the credit bureau’s website.