There are several ways to increase your credit score. Knowing what your credit score consists of is the most important factor before deciding your course of action. A credit score is not just a history of your payments, it’s a compilation of many different numbers and statistics based on all credit behavior. It’s partially payment history, part type of credit, part length of credit, and current outstanding credit. It can also include any applications for new credit. Each portion of the credit score has certain significance. In order to increase your credit scores, be it FICO or the credit bureau scores, you’ll need to know which factors are affecting your scores negatively.

Thirty-five percent of the FICO score is previous credit payments; this includes any late payments, nonpayment, collections or judgments. Each of those has varying degrees of points which factor into a very complex algorithm. If you have any recent collections or judgments, within 3-6 months, you’ll most likely be turned down for 99% of all credit applications. It’s better to get those payments back on track and have a solid history before making an application. Additionally, getting a secured credit card, if you don’t have a credit card, is a great option. Secured cards give borrowers and opportunity to prove they are good risks for credit. A secured card is a collateral based credit card. The collateral is usually in the form of a savings account held with the lender in the amount of the card’s limit. For example, sending in a $500 check to the lender will garner you a $500 credit card limit. If you go this route, be sure the lender reports to all three credit bureaus and that you make every payment on time, and preferably in full every month. This is only one significant factor in to increase your credit scores.

Another 30% of your FICO score is your current outstanding available credit and balances. This factor is determined by what types of loans, credit lines and mortgages you have outstanding. It counts how much you owe on each of those and what types of limits they have. If you have no late payments, judgments or other problems with past credit history, you may have too much outstanding credit. The best credit scores have a single mortgage, one or two high limit credit cards with low balances and an auto loan. If you have several credit cards, close the lowest limit cards.

Your length of credit history is another factor in your FICO score, but it’s not something most people can do anything about. If you have no, or minimal, credit history, time is the only fix for this credit score problem. Regardless, this is only a 10% (approximately) factor in your overall score.

The types of credit are important as well as all of the above. Good credit scores include a mortgage, credit card, auto loan and even a store credit card. If your score is relatively low, consider the types of credit you have. Does it vary? Have you a mortgage or auto loan? Those play a huge role in stability in a person’s life, therefore they account for much more gravity in scoring.

Lastly, don’t apply for all types of loans; it lowers your credit score. Inquiries for loans stay on your credit for three months and can drastically affect your score. If you’ve recently applied for a loan, avoid applying for one for at least 3 months.

Your credit score is, unfortunately, a very important aspect of your life. Be sure to order credit reports in order to correctly steer your credit in the right direction. It’s easy to learn how to increase you credit score, when you have the right tools.

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