Success Warrior: The Blog That Embraces ADHD

Increasing Your FICO Score - Conflicting Advice

We are probably going to be buying another house in a year or two so I was starting to think about my credit score.  I was wondering if there was a way to increase my score before we buy our next house.

The biggest chunk of your FICO is whether or not you pay your bills on time.  We do that and there is nothing else to do on that except to keep doing it.

The next biggest chunk is the amount that you owe and how much credit you have available to you.  If your credit cards are maxed out, your score will be lower.  Most of the articles I have read state that you should keep the balances on your cards less than 25-30% of max.  Mine are at 0% so I can't do anything about that.

But what about getting new cards to create more available credit?

I Have Bad Credit. Can I Rent Yours? Sure!

Are you looking to boost up your credit score long enough to buy a house?  Want to do it quickly?  Look no further, the answer is right here but you have to act quickly.  This is a limited time offer.

If you have a low FICO score, a little bit of cash (or some credit left on your credit cards), and low ethics, you can boost your credit score in as little as 30 days.  That's right 30 days!

What you do is pay someone that has great credit a monthly fee and they will add you as an authorized user of one of their credit cards.  You don't actually get a card or any credit but you do get the history of the card added to your credit score.  Schwing!

How much can it help?

On the subject of running your credit report and lowering your score

I was reading some forums over the weekend and came across an interesting post which goes right along with what I have been discussing.  This guy was going to refinance his house and went out looking for the best rate that he could get.  To do this, he used Lending Tree thinking that having the banks bid against each other would give him the best rate.

That's what the commercial says and it is true except for one minor glitch in the system.

Each bank that is going to place a bid is also going to run your credit.  He said that when it was all over, his score was lower than when he started. 

One stop shopping may be the most convenient but it isn't always the least expensive.

More on protecting your credit score

One thing that you will want to do is check your own credit report and you'll want to do this at least 6 months before you apply for a loan.  The first time that my wife and I did this, we were amazed at the amount of things on there that were wrong.  Some things were plain out mistakes and others were things that should have been removed that weren't.  We were able to change our credit score for the positive over the next couple of months by challenging all the things that were wrong on the report.

One other thing that was a little surprising was that the three credit reporting agencies don't report the same stuff.  Some have information that others don't.  Some companies only report to one agency and not the other two.  You have to go through all three agencies and challenge things on all of them.

Your FICO score is actually an average between the three agencies and there can be quite a big gap between the highest score and the lowest score.

It's a good idea to routinely check your credit history.  We (and when I say "we", I mean my wife) check ours every year to see where we are.  We're going to be checking it again in the next couple of months to make sure there is nothing in there that shouldn't be.  Think of it as a virus scan for your credit.

Here's a breakdown of your FICO score

Here's a bit of information that I got from my wife's research paper that I didn't know before.  This was all secret information as far as I was concerned.  Not that it's secret but I don't think very many people know this.  Maybe you all do and it's just me that was in the dark.  Anyway, here's what comprises your FICO score:

35% - record of timely payments of loan accounts

30% - amount and type of outstanding debt

15% - length of credit history

10% - the mix of various credit accounts

10% - number and types of accounts opened recently

This shows why paying your bills on time is the highest priority as far as your credit rating goes.  More than a third of your score comes from that key factor.  Late payments can affect your credit rating for several years. 

You've all heard this before but what are you doing about it?

The best way to become eligible for a loan is to not need it.  If you don't really need the money, the bank will be happy to give it to you.  I saw this with my credit card from yesterday's post.  I got an offer from one card company to raise my limit and it would cost me $59 to do it.  A couple months after paying my cards off, a different company raised my limit for free without me asking.  They just did it as a courtesy because I was a "valued customer".  I think valued customer means low risk.  If I was a really valuable customer, I would be low risk and use their card.  I'm okay with just valued.

Your FICO scores can relate some of this information as well.  If you are going to buy a home and 3 to 5 banks run your credit history in a short period of time, nothing happens to your score.  It's considered good business to shop around for the best rate. 

If your credit history continues to be run like continuously applying for credit cards, your score goes down.  It starts to look like desperation and the risk factor of loaning money to you goes up.  It becomes a vicious cycle of course because the more you "need" credit, the less likely you are to get it.  And when you do get it, it will be at a higher interest rate because you are considered more of a risk.

Taking care of your FICO score is an important part of this equation.  I'll pass on what I know about it to you.  My wife is our FICO police so I'll ask her about tips and pass them on to you.  That's where I learned what I told you about FICO today.