Credit Tips – Understanding Your FICO Scores So You Can Improve Them

Understanding Your FICO Scores

Your FICO scores pretty much control your financial future so it is very important to know how they are figured. You should have a plan of action to get the best FICO score possible. We suggest you go to www.AnnualCreditReport.com and pull your report every 4 months.  Also, know that www.CreditKarma.com won’t be as accurate as an actual report.

There are 5 Parts to Your FICO Score

• Payment history (35% of your score)
• Amount of Debt Utilized  (30%)
• Amount of new credit (10%)
• Length of credit history (15%)
• Credit Mix (10%)

Payment History

• 1 missed 30 day payment can knock of 50 points on your FICO score.
• FICO reports will show the last 24 months of your payment history
• Bankruptcy stays on the report for 7.5 years
• Foreclosures, liens, lawsuits, etc. stay on the report for 7 years
• After 180 days a debt is considered a bad debt and collections can start.

Amount of Debt Utilized

• Mortgages, Car Loans, Student Loans, Credit Cards, etc.
• Anything above 30 percent utilization on your available credit can hurt your FICO credit score
• Tip – Pay all credit card bills 5 days earlier than they are due because their balances will be figured towards your debt utilization if not paid before the cycle date which is usually the same as the due date.
• Tip – Pay off your accounts but don’t close them. It will help your FICO score from them to be available to you and not used.
• Tip – Only use credit for transportation, education, or a home.

New Credit

• Opening a bunch of accounts all at once will send up a red flag to FICO and it will hurt your score.
• Tip – Open your credit accounts over time separated by months.

Length of Credit History

• A long, good credit history is good for your FICO score.

Credit Mix

• It’s best to have a mix of credit from a car loan to a credit card to student loan.