Start Soaring to New Heights by Raising Your FICO Consumer Credit Score
Your FICO consumer credit score is one of the most important pieces of information about you. This is because 9/10 of all top lenders use it to determine if you can pay off a loan.
It can mean the difference between getting a mortgage or other loan or not. And it can even make a difference as to whether you get a job.
If you have a small business or startup, then your ability to get a personal loan can directly impact if you can get a business loan. And if you get a loan, it can affect how much an institution will lend you. And it can also affect the interest rate they will charge you.
In particular, rebuilding your credit after filing for bankruptcy can be time-consuming and even daunting. But the end result is often very rewarding. The experts at creditcards.com created a guide outlining nine smart strategies to help you build up and take control of their credit rating.
So you want your FICO consumer credit score to be as high as possible.
In order to push that number higher, you need to know exactly what goes into a FICO consumer credit score. MyFICO, the consumer arm of FICO, explains it as follows.
Breaking down Your FICO Consumer Credit Score
Your FICO consumer credit score comes from a combination of five separate factors:
- Payment history counts for 35% of your score
- Amounts owed accounts for 30% of your score
- Length of your credit history accounts for 15% of your score
- New credit accounts for 10% of your score
- Your credit mix accounts for 10% of your score
Payment History and Amounts Owed
So if you have a history of paying your credit cards and debts on time, then that is great! If you do not carry a balance from month to month, you will have good numbers for the first two factors. And they make up nearly 2/3 of your score.
These can be debts such as your mortgage or a car loan, which many of us have.
Credit History and New Credit Accounts
Also, a person new to credit will have not so good numbers for the third and fourth factors. But those only account for ¼ of the overall score. For example, this person could be a recent college graduate.
Once they establish more of a credit history, that person will do better on the third and fourth factors. Those will have less of an impact than paying off their balances on time. But they are much better than nothing.
Particularly when you are just starting out, every bit helps with a FICO consumer credit score.
As for the final factor, a credit mix just refers to the kinds of debt you are carrying. These are items such as student loans, credit cards, a mortgage, etc. But do not run out and sign up for more credit cards just to improve credit mix!
If you cannot afford more debt and do not trust yourself with a lot of cards, then you are only asking for problems.
Because this is a less important factor, many do better to carry fewer cards and pay them off on time. This can be a better choice than to open another charge account. And then you would have the potential to be late paying its balance.
But if you always pay on time, and without fail, adding another card can be a viable option. So be honest with yourself as to whether you could pay off another card.
Improving Your FICO Consumer Credit Score
1. Check Your Credit Report
Before doing anything else, get your credit report from Equifax, Transunion, and Experian. You can use AnnualCreditReport.com to get all three. And look it over with care.
Know what is happening with your credit. Make certain it is being reported and attend to any inaccuracies as soon as possible. Get in the practice of checking credit reports and digging into the specifics, and not just the scores.
Check for suspicious charges, or for closed credit card accounts or loans which have been paid off. Make sure the report is error-free, and take it up with the applicable credit bureau if it is not. Lock or freeze your credit if you are suspicious of identity theft.
Monitor your consumer credit, and chase down errors more quickly. Update the relevant information if there are errors or the details is incomplete. Here is how.
Fix Your Credit
Mistakes in your credit report(s) can be corrected. But the CRAs typically want you to dispute in a particular way.
Disputing credit report inaccuracies generally means you specifically spell out any charges you contest.
At Equifax, you can monitor your account at: https://myservices.equifax.com/W18fpd04_uplanfr . Or get alerts here: https://www.equifax.com/personal/products/credit/score-watch-and-monitoring/
Update your Equifax information here: https://help.equifax.com/s/article/How-do-I-correct-or-dispute-inaccuracies-on-my-Equifax-credit-file
Freeze your Equifax credit here: https://help.equifax.com/s/topic/0TO37000000CjteGAC/security-freeze-fraud-alerts
Lock your Equifax (and TransUnion) credit here: https://www.transunion.com/product/credit-lock
Equifax Dispute Details
Dispute your or your personal Equifax report by following the instructions here: https://www.equifax.com/personal/disputes/
As for dispute documentation, Equifax says:
“You may submit documentation to us as part of your dispute. Any document submitted by a consumer who has initiated a dispute to update or remove a public record item will be reviewed by Equifax. Certain documents that meet Equifax’s criteria (for example, the document must include a case number/docket number and/or page/book number that matches the information reflecting on the credit file) will be accepted to update or suppress a public record item with no further reinvestigation.”
At Experian, you can monitor your account at: https://www.experian.com/consumer-products/credit-monitoring.html
Freeze your Experian credit here: https://www.experian.com/freeze/center.html
Experian Dispute Details
Dispute mistakes and update information on your Experian report by following the instructions here: https://www.experian.com/disputes/main.html
For disputing by mail, Experian says:
“Please include all of the following when requesting your dispute:
- Your full name including middle initial (and generation such as JR, SR, II, III)
- (and) date of birth
- Your Social Security number (if you have never been issued a social security number, please note that in your request)
- All addresses where you have lived during the past two years
- One copy of a government issued identification card, such as a driver’s license or state ID card, etc.
- One copy of a utility bill, bank or insurance statement, etc.
- List each item on your report that you believe is inaccurate, the account number and the specific reason you feel the information is incorrect.
- There is no charge for submitting a dispute.”
There are similar requirements for disputing online.
Create a TransUnion account. They are free and very helpful. https://membership.tui.transunion.com/tucm/login.page?
They are also a way to check up on your scores with Experian and Equifax.
Monitor your TransUnion account with credit alerts here: https://www.transunion.com/product/transunion-credit-protection
Freeze your TransUnion credit here: https://www.transunion.com/credit-freeze
Lock your TransUnion (and Equifax) credit here: https://www.transunion.com/product/credit-lock
TransUnion Dispute Details
And you can dispute any errors on your TransUnion report here: https://dispute.transunion.com/dp/dispute/landingPage.jsp.
When disputing with TransUnion, make sure you include:
- Your TransUnion file number
- Social Security Number
- Date of birth
- Current address
- Company name of the disputed item (from your credit report)
- Account number of the disputed item (from your credit report)
- Reason for your dispute (such as, it is not your account; you have paid the account; etc.)
- Any corrections to your personal information (address, phone number, etc.)
2. Take Action by Setting up Payment Reminders
Never be late again by adding a calendar reminder to your computer or phone. Establishing a habit of paying your loans and cards on time will go a long way to improving your score.
3. Keep Your Balances Low
Look at your expenses and budget where you can. Stop using some of your cards to give yourself a fighting chance of getting your balance down to zero.
And always pay more than the minimum. Since that way you are not paying a hefty amount of interest over and above your balance. Keeping your balances low will make it easier to pay your bills on time.
Furthermore, do not pay one credit card with another. Instead, pay down your debt, rather than simply moving it around.
4. Paying off a Collection Account Will Not Take it off Your FICO Consumer Credit Score
Instead, it will stay on your report for a good seven years. Therefore, try not to let your debts accumulate to the point that they go to a collection agency.
5. Do Not Do Too Much Rate Shopping
While it may make sense to shop around for the best rate for a large expense such as a mortgage or a car loan, you do not want to be doing this too much. FICO will distinguish between a few quick inquiries versus continual rate shopping, and the latter can lower your score.
Bonus #6: Talk to Your Creditors – and a Credit Counselor – if you just can’t Pay Your Bills
Working with a credit counseling service will not hurt your FICO score. And working with your creditors will mean your account will be less likely to go to a collection agency.
Bonus #7: Opening or Closing a Number of Accounts Can Hurt Your Score
If you are new to credit, adding a bunch of credit cards will not increase your score. And if you have unused cards, closing a lot of them at once can hurt your score as well.
Responsible Use of Credit
Finally, raising your FICO consumer credit score is a good goal to have. But it is not an end goal unto itself. A better goal, and a more sustainable and helpful one in the long run, is to manage your credit responsibly.
If you are as passionate about this as we are, please help us spread the word about how to raise your FICO consumer credit score.