SEVEN STEPS TO A HIGHER

CREDIT SCORE

Forbes.com

PAY BILLS ON TIME

Make payments as early as possible. Late

payments will negatively impact your FICO score. The longer you pay your bills on time, the better your credit score will be. Payment history is the

single largest contributor to your score, accounting for 35% of a FICO score.

PAY DOWN YOUR CREDIT CARDS

Reduce your revolving credit. FICO favors

untapped credit lines. For example, if you have five cards with a credit limit of $10,000 on each, but

you are carrying no debt, that helps your score.

But if you use more than half of the credit on any of those cards--even if you are making your

payments on time--it can result in a lower score. Amount owed and the

proportion of credit used to what is available

account for 30% of your FICO score.

BE DIVERSE

Diverse lines of credit--like a car loan, a credit

card and a mortgage--will typically help your score. About 10% of your FICO

score is based on the diversity of your credit

sources.

LENGTH OF CREDIT COUNTS

Payment performance and length of time you have had

individual lines of credit represent 15% of your FICO score. Longtime accounts in

good standing help your score, so don't close unused credit cards. But also don't open new accounts that you don't need just to increase

your available credit. Such a strategy could backfire, as

new accounts will lower your average account age, and rapid account buildup can look risky. These have a

larger impact on your score if you don't have a lot of other

credit information.

CHECK YOUR CREDIT REPORT FOR ERRORS AND GET THEM FIXED

Check each of your three credit reports for errors before applying for a new mortgage or loan. Make sure

everything in each report is accurate. Look for errors, misinformation or inaccurately reported information,

such as a bad debt that was paid off years earlier. Just a 10-point swing

can make the difference between not getting a loan and getting one at a good rate. Start checking reports

from the three credit reporting agencies 60 days before applying for new credit, since it takes time for the reports to reflect changes. The Fair

Credit Reporting Act requires each of the nationwide consumer reporting provide you with a free copy of your credit report, at your request, once a

year. To order one, visit www.annualcreditreport.com.

MINIMIZE CREDIT INQUIRIES

Each time you apply for a loan or a new credit card, the issuer

will request a copy of your credit report. This "inquiry" can

knock a few points off your credit score, so if you are in the

market for a mortgage or an auto loan, shop around before

you apply for the loan to minimize the number of

inquiries in your report. If your credit report gets hit by active inquiries for the same type of

loan over a short enough period of time--30 days or less--it will count as one inquiry. Volume of inquiries accounts for 10% of

your FICO score.

WATCH OUT FOR LOWERED CREDIT LINES

Lenders are lowering lines of credit, from credit cards to

home equity lines. Your credit score may decline if you have already tapped a

high percentage of your available credit. Say you have a balance owed of $35,000 with a total of

$50,000 in credit available to you. If one or more of your lenders reduces the

total available credit to you down to $35,000, your high credit utilization level will

drag down your credit score.

SOURCEAuthor: Carrie Coolidge

http://www.forbes.com/2008/12/03/experian-transunion-fico-pf-ii-in_cc_1203creditscore_inl.html

December 3, 2008