Top 12 Tips For a Higher Fico Score

• Do the basics: Check and correct credit report errors. Take advantage of the many ways to get a free credit report with online vendors, or a free credit report without a credit card through the bureaus themselves with recent legislation. Pay your bills on time every month. Don't assume that once you're over 30 days late your credit is already shot-it gets worse as you hit 60 days late, and at 90 days & over the score definitely dives. Also, don't assume that if you have had trouble paying your bills in the past year or so, that getting back on track will take forever. It won't; time passes and accounts that are paid on time begin to lift the score noticeably after 13 months. Keep at it!

• Keep your revolving account balances under 50%. The "proportion of balances to credit limits" score factor has a lot of weight in the scoring models. Even if you pay your bills on time every single month, it will hurt your Fico score to have a 50% or higher balance against your credit limit on on any account.
  
  
• Limit the number of accounts you open. When you shop the mall at the holidays, don't open new store card accounts all over for the one-time discount. Carrying too many accounts has a negative effect on your score.
  
  
• But don't carry too few accounts. Typically, three accounts-an installment account like a mortgage or auto loan, a revolving account like a Visa or MasterCard, and one store or gas credit card account, all held for 1-3 years at least, will give the Fico score models enough credit history. Too little information is negative and can trigger a negative scoring factor.
  
  
• Make sure negative accounts are not duplicated. Sometimes an account will go to a collection company for non-payment. If the original creditor reports the account as still delinquent, and the collection company reports the same account as delinquent, you're paying twice for the same mistake. Only the collection company should report. You can contact the original creditor and each credit bureau affected to request an investigation.
  
  
• Accounts dismissed in a bankruptcy should not continue reporting delinquencies. The bankruptcy showing on your credit report causes a significant score drop. But if the accounts that were dismissed in this action are still reporting past-due status, the Fico score model reads it as though the account is delinquent in the present, even if the discharge was years ago and it will continue to depress your Fico score inappropriately. Contact the creditor and the credit bureaus for adjustment.
   

• Don't pay off a lien or judgment before getting your home or auto loan until the lender requires it. It may seem like paying off a judgment might remove it from your credit report and raise your score. While paying off a past debt is the right thing to do, the timing needs to be looked at carefully. If you pay a judgment or lien that's years old, the date of "most recent activity" becomes now, and that makes the Fico score model evaluate the account as though it is current. The delinquency is brought forward and the score drops, even though paid. It's as if it sees your serious delinquency as occurring just last month, and payment this month. So if you have old, unpaid judgments or liens in your past, pay them upon the lender's request for your steps to close your loan, or after you have secured your loan.
   

• When you rate shop for loans, do it in two weeks or less. All mortgage or auto loan inquiries will count as only one inquiry if they are made within two weeks of the first inquiry. So if you're shopping for a mortgage or auto loan, get your ducks in a row before you submit that first application. Inquiries, incidentally, don't drop your score much-maybe 1-3 points each-but every point counts if you are at a threshold for the next higher level of interest rates. Also, the Fico score will drop more than this if you make several inquiries close together for credit cards or personal loans, as the model perceives that you're looking for money due to cash troubles.
  
  
• If you declare bankruptcy, open a secured credit card account immediately (sometimes known as a bad credit credit card). Even one credit account with a small amount of cash held as collateral by the issuer will work to raise your score. Use your card a little every month, keeping the balance under 50%. If you use a card once per month, for instance, and pay $5 or $10 or the minimum payment due, you begin to show a new, reliable payment history. It's not how much; it's how reliable you are with repayment. As mentioned previously, 13 months of positive payment history gives your score a good lift.
  
  
• When deciding between a home equity loan and a home equity line of credit, opt for the loan if you will be using over 50% of the proceeds. Why? Because the Fico score looks at lines of credit as revolving accounts-like credit cards. If you carry over a 50% balance on this line of credit, it will drop your score as it activates the "high proportion of balances to credit limit" factor again. Not many people can come up with thousands of dollars to pay down a line of credit to less than 50% for a higher score, so plan your needs carefully when deciding what type of cash loan you require and how much is needed. If you find yourself already in this position, ask your lender if they will raise your limit by the amount needed to put the existing balance at under 50% of the total-some will and the effect on the score will be the same after it's reported.
  
  
• Don't close old accounts indiscriminately. Old accounts that were paid as agreed show the score model that the consumer has a longer history of good credit use. Deleting these accounts unnecessarily can lower your score.
  
  
• Use rapid correction services for error correction and updates when applying for a home loan. If you've paid a bill that's not showing on your report because it was made in the last 30 to 60 days, consider using a rapid correction service to show the bill paid and get it reflected in your fico scores. Use this service also for error correction. It takes 3-10 days over the regular 30-60 day turnaround, and is available from many mortgage brokers & lenders through their mortgage credit report vendor.