A recent report shows the proportion of Americans with FICO scores below 600 – a level that makes it nearly impossible to get loans – has risen to almost 26%. The causes: high unemployment and bad debt. At the same time, lenders are getting pickier about credit qualifications. If you are concerned about your score, here are some ways to improve it:
- Know your FICO score. The biggest factors in your score are payment history (35%), amount owed (30%), length of credit history (15%), new credit (10%), and types of credit used (10%).
- Pay on time. This one is obvious.
- Lower your debt. Utilization rate is the combined balances on all credit cards divided by your combined credit limit. Try to keep this rate at 10% or lower.
- Don’t apply for credit you don’t really need. Applying counts as an inquiry and can ding your score. Don’t take advantage of those 10% off offers if you open a credit card at the mall. That 10% you save on the purchase could lead to higher interest rates and a lower FICO score.
- Don’t close credit card accounts. When you close an account, you reduce your available credit limit and that increases your utilization rate. Conversely, you should not have too many or too many idle accounts either.
The easiest way to get your credit score is to go to www.myfico.com. Any score over 750 is very good. You can get a free copy of your credit report (but not score) annually by going to www.annualcreditreport.com.