Fixing your credit score or your FICO score can seem like a daunting task when the score is much lower than the national average. The key to improving credit score can mean less about what credit decisions you have made in the past and more about the credit decisions you are currently making and you make in the future. Improving a FICO or credit score can improve your overall interest rate for purchases dramatically and should be worked on heavily before choosing to invest in a new home or a new vehicle.
The credit score or FICO score of a person is the numerical equivalent to the person's credit history. The FICO score judges the credit worthiness and the ability of the person to pay back debt. When a credit score or FICO score is low, lenders will believe the person is not able to repay debt and will thus not extend any further credit to the person.
A FICO score can range from 350 to 800 points with the higher the score meaning a better credit rating. When the aim is fixing credit, the most recent credit decisions are the ones that will most affect the overall credit score or FICO score.
• Pay bills on time. From the day that you decide to improve your credit score, you will need to pay all bills on time. This timely payment will establish a new credit relationship between you and your current lenders. They will report the bills as paid on time and this will raise your overall credit score.
• Don't take on too much debt. The overall debt to income ratio is another important factor when judging credit worthiness. If a person has too much debt in relation to the amount of money they earn, the lenders will shy away from offering new credit. This will also lower the credit score.
• Stay away from debt consolidation companies. Debt consolidation companies do not offer any additional help to the person aiming at fixing credit. They simply work with the debtors to create a win-win situation. The debtors get their money and the payers pay less. But, this will be reported on your credit report and can lower your credit score.
• Opt for bankruptcy when needed. If you find yourself overwhelmed with debt with no way to pay back the creditors, aim for bankruptcy. Even though it will stay on your credit report for 7 to 10 years, the slate is wiped clean and those years can be spent paying everything on time. This is a great option for people who have a very low credit score.
Changing your credit or FICO score for the better takes time. There are no quick fixes and the only true way to accomplish fixing credit is to work with the creditors to pay off the old debt while paying every new bill on time. Keeping current bills current will greatly improve your credit score for the positive and can even raise your score 20-50 points or more within the first year of current payments.
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