HOW TO IMPROVE YOUR CREDIT SCORE? BASIC INFORMATION AND TUTORIALS

These are the ways to Improve Credit Score. Define first what is Credit Score?

What Is Credit Scoring?
Through credit scoring, lenders try to minimize individual human judgment in the mortgage lending decision. Credit scoring data with auto loans, department store accounts, and credit cards proves that computer statistical programs can distinguish among platinum, gold, copper, lead, and plastic borrowers far better than back-office loan clerks or front office loan reps.

To create these credit scoring programs, math whizzes study the credit profiles, borrowing habits, and payback records of hundreds of thousands of people. Then they search for statistically significant correlations that tend to rate borrowers along a continuum from “walks on water” (say, 800 or higher) to “let’s pray they drown” (say, 500 or lower).

Supposedly, credit scores may range from 350 to 900, but more than 75 percent of Americans fall within the range of 600 to 800.

Credit scorers place your credit data into their computer programs and out pops a number. But they won’t tell you precisely how they calculated that figure. However, after you’ve paid your fee at myfico.com, the website info will give you some pointers on how to improve your Beacon ®-FICO® score.

To learn how much your score actually does improve (if any) over the next 12 months, you will need to pay another fee. For that cost, you get four more periodic Beacon®-FICO® reports.
Unfortunately, the information provided by FICO still doesn’t go far enough. It’s more like,“try this (really, pay us) to see what happens. ”You really can’t tell ahead of time the specific score boost that suggested changes might bring about. Nevertheless, piecing together clues from myfico.com and several helpful loan reps, here are some good tips on how to raise your credit scores:
1. Number of open credit accounts. You can have too few or too many. The optimum number probably ranges between four and six. One highly paid, credit perfect (no lates) executive I know scored 640. After closing the 6 newest of her 12 credit card accounts, her score went to 780. (But it took six months before her score climbed up to that level.)

2. Balances. Open accounts with balances reduce your score more than open accounts per se.
3. Balances/limits. Numerous accounts with balances sitting close to the limit will bring down your score.

4. Credit inquiries. Whenever someone checks your credit file, it counts against your score. However, multiple checks within, say, two weeks may not hurt as much as if it appears that you’re merely shopping different lenders for one loan. Your personal inquiries don’t affect your score.
5. Payment record. Obviously, late payments hurt your score. But, supposedly FICO doesn’t distinguish between late mortgage payments and late payments on your Visa or student loan. (Mortgage lenders, though, most certainly do care. Always pay your mortgage or rent first.)
6. Recency counts. Late payments two years ago don’t hurt as much as two months ago.
7. Black marks. Multiple lates on multiple accounts, collections, unpaid judgments, and tax liens devastate your score.

8. Kiss of death. Go straight to credit scoring purgatory if you’re within two years of a past bankruptcy discharge or a foreclosure sale. Chapter 13 bankruptcy plans and credit counseling debt management plans also count heavily and negatively.
Myfico.com also shows that some categories weigh more than others:
◆ Age of credit (15 percent)
◆ Mix of credit (10 percent)
◆ Amount of balances (30 percent)
◆ Payment history (35 percent)
◆ Recent credit inquiries (10 percent)
The above clues shed some light on the credit scoring process, but far too little. Perhaps most importantly, they do show why “perfect credit”in the sense of “no lates” does not necessarily generate the highest FICO score.

To improve your score, you must not only pay your bills on time but also manage your credit according to the likes and dislikes of the FICO (or other) credit-scoring programs.