A hot topic nowadays that has been the subject of many books is credit score. A person’s credit score is the numerical interpretation of his credit behavior. It basically is your grade on how well you pay, if you pay on time, etc. It is also known as a FICO score and was invented by Fair Isaac.
So much buzz has been revolving around this topic, from credit repair companies sprouting like Starbucks shops, credit repair scams that terrorize the online community of credit repair seekers, to issues in disparity of information between the 3 US credit bureaus. But the noisiest topic nowadays is how to increase your credit score from the low tiers of 500 to at least a respectable average credit score of 723.
The average credit score used to be 678 based on the three major search engines but Fair Isaac announced last 2007 that it was indeed 723. The average credit score also differs per state. With South Dakota leading the pack at 710 and Texas at 651.
So how do you at least reach this average credit score if your rating is poor, level 500 poor? Here are some tips to at least get an average credit score.
• Stat at knowing where you are right now by contacting all three credit bureaus. Once you know where you are at, know also how your rating is calculated so you know where to focus on in your credit behavior. Rating is calculated as follows:
o Payment History 35%
o Amounts Owed 30%
o Length of Credit History 15%
o New Credit 10%
o Types of Credit Used 10%
As you would see it is best to focus on lowering the amounts you owe and paying on time as they affect 65% of your credit score.
• Read some literature on how to get an average credit score. Try your local library or search the web for some great books that can help you. You may want to try the following:
o Your Credit Score: How to Fix, Improve, and Protect the 3-Digit Number that Controls Your Financial
Future by Liz Pulliam Weston
o The Credit Bible by Phil Turner
o The Insider’s Guide to Credit Repair by K.E. Varner
• Try working a deal out with your lenders if you feel that you will run a little late in repaying your loan. You may not know it but dialogue may just be the key needed in making some of your miss payments not actually be reported.
• Contact a credit repair company or counselor. Make sure you find a legitimate one, best to ask people you trust if they know of a credible credit counselor as some companies use this lure for scams. Just make sure you do not pay the credit repair people without any concrete results. There are also some free credit repair advisers that you can check out.
Once you reach the average credit score, it will be a lot easier to find financing deals and get good interest rates on loans. But why stop at an average credit score? Remember, the higher the better!