Have you ever noticed how gaining weight is much easier than losing weight? Credit is the same way. Once you miss a few payments, have a delinquency, collection, judgment, lien or bankruptcy it is harder to climb back to a good credit rating than it was to get that credit card (and that one, and that one…).
Thanks to automated junk mail and pre-approved offers (which you can opt out of here) many people hold more than one credit card. Americans hold an average of 7.6 credit cards, of which 3.8 are retail, 2.7 bankcards and 1.1 debit card (Money Central). One card leads to another until they spend $1.22 for every dollar they make!
Your FICO score is like a scale. It is a number that lets creditors know how fit you are when it comes to repaying your obligations. The biggest factor in your FICO score is your payment history.
Start paying on time as frequently and consistently as you can. The further you can distance yourself from untimely payments the better your score will get. Black marks like bankruptcies are factored in here. Also, resist the urge to settle as this will hurt your FICO score as badly as defaulting will.
If you want to lose weight, you’ll begin to exercise. If you want to improve your credit score, the best way is to get out of debt. The lower your balances are the better off you are going to be because about 30% of your FICO score is based on your credit balance to credit limit ratio. So pay off your balances and keep the account open. Don’t open new accounts, as this will actually adversely affect your score.
Finally, the type of credit has about a 10% weight on your FICO credit score. This is the mix of credit you have such as credit cards, retail cards and long-term secured debt like mortgages and installment loans. When you buy a house your score goes up, move a lot and it goes down.
The bottom line is that FICO loves to see stability. If you are not sure what your score is you can order your FICO score from myFICO.com. Get a free copy of your credit report and scour it for discrepancies that may be hurting you, and then dispute those items.
If you need help, visit the National Foundation for Credit Counseling Huntsville site.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.