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Improving Your FICO Credit Score - A Quick Guide

Updated on March 3, 2015
There are several practical, easy steps that you can take right now to improve your credit rating
There are several practical, easy steps that you can take right now to improve your credit rating | Source

Introduction

Your FICO credit score and credit report are the main ways that lenders decide whether to lend you money. A less than perfect credit history can impact your ability to get credit, increase the interest rates that you pay and can mean less than ideal repayment terms.

Fortunately, there are steps that you can take right now to start fixing your credit history and increasing your FICO credit score. This article includes advice on how to find credit scores, budgeting, contacting lenders, prioritizing debt and practicing financial responsibility.

Anyone interested in improving their credit history can use these pragmatic approaches to reduce stress and secure their financial future.

Steps to improve your score

Here's the list of what you can do to improve your FICO score:

  1. Get a copy of your credit report
  2. Get your credit score
  3. Understand what your score means
  4. Understand and manage your income and outgoings
  5. Find out what you owe and who you owe it to
  6. Prioritize who you are going to pay off first
  7. Create automatic payments and reminders
  8. Make your payments on time
  9. If you are having trouble paying, talk to your lender
  10. Don't open or close accounts with lenders and don't move debt around
  11. Don't create new debt
  12. Practice financial responsibility

We'll cover each of these in more detail below.

Getting a copy of your credit report is an essential first step
Getting a copy of your credit report is an essential first step | Source

Get a copy of your credit report

You can request your credit report for free from each of the three main credit scoring agencies in the US - Transunion, Equifax and Experian.

Search for 'Free Credit Report' on their websites and follow the instructions; alternatively, you can also try a site like Credit Sesame or Credit Karma.

Get your credit score

You can get your FICO credit score through several methods:

  • You can sign up with a free trial with the various credit scoring agencies
  • You can go to a website like Credit Karma or Credit Sesame and get your scores through there for free

Understand what your score means

You'll want to aim for a credit score of 680 or above, as this will put you in the range of 'good' credit scores, which means better interest rates and credit repayment terms. If your score is 619 or below, it will need to be worked on urgently.

Understanding what your credit score is and the range it falls into is essential
Understanding what your credit score is and the range it falls into is essential | Source
Understanding your incomings and outgoings and creating a budget will put you on a stronger financial footing
Understanding your incomings and outgoings and creating a budget will put you on a stronger financial footing | Source

Understand and manage your income and outgoings

The only way to start reducing your debt is to spend less than you earn and use some of that surplus to reduce your outstanding debt.

There are lots of online budget calculators available that can help you work out exactly where your money is going. Once you know where your money is going, look at where you can cut costs further to free up more cash to pay down your outstanding balances.

Find out what you owe and who you owe it to

Collect together all of the paperwork to do with your debts. Make a note of any outstanding balances you have, who you owe the money to, how much of a repayment you need to make each month and the interest rates that you're paying.

Prioritize who you are going to pay off first

You should prioritize the debts that you are going to pay off; a good way to approach this is:

  • Pay off your smaller balances first of all
  • Pay off the loans that charge the most interest
  • Pay off the slightly bigger loans
  • Pay off as much extra a month as you can afford on your biggest loans

Create automatic payments and reminders

Set up bank drafts and make arrangements with your lenders to make regular repayments. This will help you budget and contribute to bringing down your debt.

Start making repayments to the right people at the right time
Start making repayments to the right people at the right time | Source

Make your payments on time

Being late on a payment is one of the easiest ways to damage your credit rating. Make sure that you always make your repayments on time. Setup automatic payments and if that's not possible, set a reminder to pay your dents every month.

If you have any delayed or late payments, get up to date as soon as possible.

If you are having trouble paying, talk to your lender

If you're in financial trouble, contact your lender and explain the situation.

They may be able to defer payments or work out an alternative repayment schedule that will reduce some of the financial burden that you are facing.

Don't open or close accounts with lenders and don't move debt around

Opening and closing accounts and moving debt around can do more harm than good.

Until you have repaired your credit history, don't make changes to your credit accounts.

Don't create new debt

Try not to put any more debt on consumer credit or credit cards. These often have high interest rates and you could get deeper into financial trouble. Instead, save up your surplus income until you have enough to buy what you need to without going into further debt.

Practice financial responsibility

Understanding your finances, incomes and outgoings is essential to improving your financial responsibility.

Once you are on top of your debts, continue to budget responsibly, spend your money wisely and stay out of expensive, long-term debt.

With care, attention and responsibility, you can find your way through debt
With care, attention and responsibility, you can find your way through debt | Source

Managing your credit score

What is the next step you're going to take to improve your credit rating?

See results

In closing

These practical steps will all help you to rebuild your credit history, improve your score, get you out of debt and reduce the stress that you feel over your finances.

Taking some simple measures now will improve both your peace of mind and your financial security.

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    • Paul Maplesden profile image
      Author

      Paul Maplesden 2 years ago from Asheville, NC

      Thanks for letting me know. Next time I revise the hub, I will add that in.

    • MarloByDesign profile image

      MarloByDesign 2 years ago from United States

      In the U.S., each of us can get a copy of our credit score for free (one time per year) and I think that is worth mentioning. I voted on your poll as well. Thanks for the reminders!