HOW I RAISE MY CREDIT SCORE FROM 470 TO 780 - FICO SCORE SECRETS

Disclaimer: This article is for informational purpose only. I am writing my experience in raising my score. Results are not guaranteed.

Your credit score is basically a snapshot of your current financial situation. Most financial institutions rely on FICO credit score to decide whether they should borrow money to you or offer you a credit card. The score range from 300 to 850. Anything above 700 is considered GOOD. The FICO score is developed by a company called Fair Issaac Corporation. It collects all available information about you (your job, your income, your debt, your business, and everything it can get its hands on to about you) and come up with the final score using some statistical modeling to measure your creditworthiness or credit risk. The FICO score is not set in stone. It changes almost every month or every year depending on the kind of activities that get recorded in your consumer file. Therefore, it is possible for you to raise your score and as well as lower your score. And that's what this article is all about. How you can intentionally raise your score over time!

A Little Information On Factors That Affect FICO Score

35% on your payment history - That's a huge number. If you pay your car loan, mortgage, existing credit card bills, and retail store charge cards on time, your credit score can improve dramatically. If you have some late payments, your score can drop drastically too.

30% on credit utilization - That's nothing more than a ratio of your debt to available credit. It's basically a debt to credit ratio of your revolving accounts (such as credit cards).

15% on your credit history - The longer the better.

10% on types of credits - The more variety of accounts (mortgage, car loans, installment loans, credit cards) you have, the better.

10% on recent applications for credits - Applying many credits in a short period of time can hurt your credit score. On the other hand, if you are shopping for a car loan or mortgage in a short period of time will not decrease your score. In addition, self credit check, employer-initiated credit check, or credit check by companies to offer you credit cards will not hurt your credit score.

There are 3 major credit bureaus that keep your credit history (Experian, Transunion, and Equifax). They all use more or less the same formula to calculate your FICO score, but each bureau will report slightly different scores depending on their own formulas. Your score can vary a few points to ten or more points (ex. 721, 730, or 735). The credit card companies usually pull the scores from all three credit bureaus.

Ways To Improve Your Credit Score

1. Do not neglect your debt with the credit card companies. They are willing to work with you as long as you tell them your financial difficulties. If you think about it for a moment. They want their money back. It only make sense for them to work with you so that you do not default on them. Once they refer your account to the collection agencies, that's when things can get much harder to work with. Besides, the collection agencies are not on your side.

2. All delinquencies will stay on your credit file for up to 7 years. Therefore, it will take some years before things can get better. In the mean time, you can do a few things to improve your credit score. Assuming, you have most of your credit accounts under control, meaning you have made some arrangements with the creditors to repay what you owe, you can apply one or two GAS CARDS (Chevron, Mobil, etc.,). Be aware that the limit will be low and the interest will be high (as high as 26% APR or even more). The purpose here is not to accumulate more debt, but to rebuild your credit and your credit history. Use a little but never miss a payment (your FICO score depend 35% on your payment history). Even after 1 year of regular payments, you score can rise quite a bit.

3. If you still have other credit cards that are in good standing, try to pay down your debt so that your debt to credit ration is under 30%. (e.g., you owe $290 and your available credit is $1000). You FICO can rise significantly once you owe less than 30%.

4. Do not try to cut up all your credit cards! Surprise? Remember, your FICO score depends on the credit history too. If you even have only one account in good standing and you have that card for a long time, you may want to keep it. The logic is that if you cancel your card with the long history, you are essentially SHORTEN your credit history. Therefore, when you apply a new card in the future, your credit history will only be as old as whatever cards you are left with. The FICO score calculations put some weight on your credit history...about 15%).

5. Once you get your gas card, wait about 9 months or more and you can try to apply a store charge card (e.g., JCP or Macy's). Again, the purpose is to build your credit and not to accumulate more debts. Therefore, if you can manage to get one, use it very sparingly and make regular payments without missing a month. IF YOU GET DENIED, please do not apply repeatedly to other store cards. Why? All the declines stay on your credit files for 7 years. More importantly, 10% of the FICO Score calculations depend on how often you apply for any kind of credits.You can also try some small credit card companies such as CreditOne, AppliedBank, or MerrickBank. They will charge you high interest (e.g., 26% APR). They may charge you so called "monthly account maintenance fee." Use your judgement. It's not bad to have one of those cards, use extremely sparingly, and pay your debt in FULL every month. Since they report to the credit

6. Once your financial situation gets better, and let's say you are trying to buy a used car, try to apply a car loan. Even you can pay cash down, financing a car purchase with a reasonable interest is a good thing. Keep in mind that some car loans are too easy to get. There is always a catch. The interest can be very high (ex. 21% APR). You should walk away from any high interest loans. Raising your score is not as important as staying clear of unreasonable debts. After all, only 10% of the FICO score calculations depend on you able to show that you can manage any kind of debt (whether credit cards or installment loans). In fact, I have raised my score to 780 without having a single installment loans such as a car loan.

7. Get your own FREE credit report from Annualcreditreport.com and make sure everything in the reports are correct. I usually find a few mistakes that can negatively impact my credit score. If you find them, contact the credit bureau that has the wrong information, go through the dispute procedures, and have those incorrect information removed. By law, they have to respond to you within 30 days. If they do not respond in 30 days, by default, they have to admit that whatever you are disputing is legitimate and they have to remove those incorrect information. On the other hand, the credit bureau can respond with their own decision as to what it wants to do with that information.

8. My final advice...do the things that will impact your score the most in a positive way. MAKE PAYMENTS REGULARLY WITHOUT MISSING A BEAT!!! I use online banking. It's terrific. You can either schedule your payments or have the credit card companies automatically deduct monthly payments from your account. In fact, I have to thank my online banking for raising my score. Writing a check and sending payments by mail, in my opinion, is the least reliable way to make the payments. For one thing, you cannot control the speed of your mail. There is always a chance that the payment will miss the due date. For another, some credit card companies pray on consumers by holding your payment until after the due date so that they can slap you with late fees on top of 29% APR interest rate.

There they are. I use all of the above strategies to raise my score to 780 and I intend to raise it even more. My target is 800. The score above 770 compare to 800 really doesn't have any benefit in reality in terms of getting a lower interest rate for any kind of loan. I guess it does look different for those credit score maniacs (may be I am one too!).

Good Luck!