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How To Increase Your Credit Score

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How To Increase Your Credit Score

By Marco Carbajo, Guest Blogger
Published: August 14, 2013

Are low credit scores (FICO® Scores) holding you back from getting the credit you need?

What would an extra 20, 30, 50 or even 100+ points more do for your credit scores?

If you are looking to learn how to increase your credit score, you’ve come to the right place.

Whether you are trying to obtain a credit card, buy or lease a new car, purchase a home or simply raise your scores, I’m going to share with you a simple yet powerful way to do just that.

Did you know 30% of your credit scores (FICO® scores) is impacted by your debt to credit utilization?

Credit utilization is the ratio of your credit card balances to credit limits on your credit reports. To find out your credit utilization, divide your credit card balance by your credit limit. Then multiply it by 100.

If you have been asking yourself "How can I improve my credit score?" you should keep this number under 20%. One of the best ways to lower your credit utilization is simply paying down your revolving credit card debt.

Another strategy is transferring a portion of your balance from one credit card to another card with much lower credit utilization.

It’s far more effective having two credit cards each carrying under a 30% debt to credit utilization. Less effective is having one card carrying 90% credit utilization and the other card carrying 10% credit utilization.

The FICO® scoring model not only looks at your credit utilization for each of your credit cards separately, but it calculates your overall credit utilization as well. High credit utilization in either category can have a negative impact on your scores.

Another way to increase your credit score is by increasing your credit limits. If your individual and overall credit utilization is high, you can lower this number immediately by increasing the amount of credit you have available.

This is accomplished by requesting a credit limit increase from your credit card issuer. Keep in mind that this should only be done if you have great payment history with your credit card company.

Lowering each individual credit card and overall debt to credit utilization could dramatically increase your credit scores depending on how much of a difference you make.

There are many ways you can learn how to increase your credit score, but the real key is learning how to play the game. You can find out more information on how credit scores affect the price of credit and insurance here on IRS.gov.

About the Author:

Marco Carbajo

Guest Blogger

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in 'Fox Small Business','American Express Small Business', 'Business Week', 'The Washington Post', 'The New York Times', 'The San Francisco Tribune',‘Alltop’, and ‘Entrepreneur Connect’.

Comments:

Don't fall for the myth that you have to carry a balance to have good scores. You don't, and you shouldn't. But having and using a credit card or two can really build your scores. If you can't qualify for a regular credit card, consider a secured credit card, where the issuing bank gives you a credit line equal to the deposit you make. Look for a card that reports to all three credit bureaus.
Very nice post explaining how does work the credit score. This system need to export to different countries in Europe. It is a real good idea and easier for everyone.
This is indeed a very interesting post on credit scores, i never knew it worked like that. I wished we would have a system like this here in Brazil, but like always we're the last country to have anything innovative coming our way.
Great article explaining the system of credit score. You know, I live in France and we don't have that system here but It may be a good idea after all, it would be benefit for everyone I think.
this is quite helpful for me as I was planning to increase my credit limit soon.
I have found out from our banker that the best way to get a good credit score #1 is to pay your bills on time, ever be late. #2 - don't pay them off early or max them out. When you pay them off early the company hasn't had enough quarterly time to report in your behalf to the bureaus.If you max three or four cards out, it looks like your well on your way to bankruptcy. Not have enough assets to live from. I stopped maxing my card out, kept a reasonable balance on them, paid monthly fees, 2 at a time to keep intrest cut in half and my credit is an 813. I don't know how good this is but it must be excellent because I can get what we need to function and run our business on my name without collateral. Dennis

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