Credit is an extension of money, services or goods, with the understanding that payment will be made in the future. Without credit it is impossible to get low interest rates on purchases, credit cards, and loans. Before retailers and bankers extend credit to consumers, they review the consumer’s credit history, and their FICO score, and make their determination; however, the most important factor is the credit score. Credit scores range from poor to excellent. Higher credit scores reflect more trustworthiness, and a higher ability to repay debts and loans.
FICO CREDIT SCORES
• 300- 629 Bad credit
• 630- 689 Fair credit
• 690- 719 Good credit
• 720- 850 Excellent credit
Since the economic downfall a few years back, millions of Americans now suffer with unfavorable credit scores. Credit scores rise, and falls depending on each person’s individual financial status. Low scores can always be increased, with the right tactics. Always check all three credit reports each year for errors and outdated information. Nevertheless, there are several ways to increase one’s credit score:
Pay Bills on Time
Making late payments have a negative impact on FICO scores. Once late payments go into collection they stay on the borrower’s credit report for years. Set up a payment plan to stay current. Direct payment from a savings or checking account works great. This allows the bills to be paid on time, and provide documentation.
Catch up Missed Payments/ Try to Stay Current
Paying bills late can become a bad habit, and should be avoided. Pay bills as they become due, or pay them early, and continue the pattern. Paying bills on time can increase FICO scores considerably over time. Credit performance is not a major problem, it eventually goes away, as new credit patterns develop.
Paying Bills Already in Collection Does Not Count Toward Credit Score Increases
Once debts go into collection, they stay there for seven to 10 years. Contacting the original debtor and making a payment arrangement in exchange for positive input on the credit report may be a possibility. Some debtors are willing to work out a plan that both parties can agree with.
Keep Credit Card Balances Low
Avoid the pit of charging everything to a credit card. Keep the balances low, and pay the balances off before or by the payment due date. Do the same for revolving credit accounts. Low balances show credit maturity, and creditors view this stance as being responsible.
Contact a Credit Repair Agency or Credit Counseling Center
Consumer credit counseling classes can help with debt management, credit improvement, and debt relief. Classes address all types of credit concerns, and offer consumers several options for increasing their credit score, and managing their finances.