Raise Your FICO Credit Score: A Complete & Ethical Guide

  • Understanding your finances and setting a budget
  • Understanding what you owe and who you owe it to
  • Paying off small balances
  • Setting up automatic payments
  • Setting up payment reminders
  • Paying your bills on time
  • Getting up to date with missed payments
  • Asking lenders to forgive missed payments
  • Talking to your lenders
  • Reducing the amount that you owe
  • Keeping what you owe on cards to a minimum
  • Not moving debt around
  • Not opening or closing accounts unnecessarily
  • Not using credit repair companies
  • A summary of what to do and what not to do

Benefits of following this guide

  • Improve your credit history, rating, and score
  • Use ethical, practical advice to get a better credit rating
  • Take small, practical steps to get in control of your finances and your debt

A note on terminology

Your individual credit score is based on your credit history. When we talk about improving your credit score, what we actually mean is establishing a good credit history, which will be reflected in an improvement to your credit score.

Step 1 — Understand your existing credit report, score and rating

Get your credit report and check it — To repair your credit score, you need to understand how your credit is rated right now. You can get hold of your credit report for free. You should:

  • Check that there are no late payments listed incorrectly
  • Check that there are no credit accounts listed that you don’t know about
  • Check that any balances and amounts owed are correct
  • Check any other information listed for you or people connected to you to make sure it is accurate
  • If you find any inaccuracies in the report, let the credit bureau, lender and any other agencies know so that they can be corrected as soon as possible

Step 2 — Understand your finances and set a budget

You need to set a budget so that you know exactly how much you have coming in and going out every month. That way, you will know exactly how much you can afford to replay, without getting yourself into further debt. There are a number of budget calculators available that will help you understand your income and where you are spending your money.

Step 3 — Understand what you owe and who you owe it to

List how much you owe to each particular lender and how much interest they are charging. Then, take any spare money that you have left over and pay off the higher interest debts first of all.

Step 4 — Pay off small balances quickly

If you have a number of credit cards with small outstanding balances on them, pay them off as soon as possible. Having lots of credit accounts with balances can hurt your credit score. Instead, try to limit your credit spending to one or two credit cards.

Step 5 — Set up automatic payments so that you don’t miss repayments

One of the main areas that can hurt your credit score is when you forget, or you’re not able to make regular monthly payments. This goes onto your credit report as a ‘missed payment’ and is a red flag to lenders because they are less likely to lend you money if you can’t repay it.

Step 6 — Setup a reminder system so that you remember to make payments on time

If you can’t, or don’t want to make automatic payments, set up a reminder on a monthly basis so that you remember to make your minimum payments. There are several ways of doing this:

  • You can set it up as a repeating appointment or task in your calendar
  • There are several free services that will email you on specific dates to remind you to pay your bills; search online for ‘reminder services’ for a list

Step 7 — Always pay your bills on time

Missing even one payment can have a major impact on your credit score. If nothing else, always remember to pay any outstanding amounts on time, every month, and where possible, always pay off more than the minimum requested; this will help you get out of debt faster.

Step 8 — If you have missed payments, get up to date as fast as you can

Sometimes, it’s possible that you will miss a payment. If this does happen, try to make sure that you get up to date with your payments as soon as possible. The longer that you can go without a missed payment, the more your credit score will improve.

Step 9 — Ask if a lender will remove a missed payment from your record

If you have a good history with a lender and you’ve just missed one or two payments, which you then later repay, it may well be worth contacting your lender to see if they can remove the late payment notification from your credit report.

Step 10 — If you are having problems paying, talk to your lenders

In some situations, you may owe more in your household expenses and repayments than you make in a given month. If this is the case, speak to your lenders as soon as you can and explain your situation. In many cases, they may be able to assist you with repayment terms.

Step 11 — Reduce the amount that you owe as soon as possible

The single biggest step you can take to improve your credit score, financial responsibility and sense of achievement is in reducing the amount that you owe. This has several benefits:

  • You will be debt-free sooner
  • It looks good on your credit score and is an encouragement to lenders
  • When your debt is paid off, your money will be yours again

Step 12 — Keep the amount that you owe on credit cards to a minimum

It can be very tempting to spend money on credit cards, but the interest charged can quickly add up. It’s good for your credit score if you can keep your balances down to a reasonable level that you can afford to repay.

Step 13 — Don’t move debt around

Moving debt from credit card to credit card or between loans can damage your credit score. You are much better off simply paying off the outstanding balance on a credit card or loan, rather than moving it elsewhere.

Step 14 — Don’t open or close credit, loan or credit card accounts unnecessarily

Closing down or opening up credit accounts without a good reason can harm your score, specifically:

  • Never open up lots of credit accounts in a short period of time, as this is an indication that you may be applying for too much credit and will have issues repaying
  • Don’t open accounts just because you can; this is unlikely to improve your credit score
  • Be responsible with opening credit accounts and paying them off
  • If you do need to open a new credit account, use it for a specific purpose and then pay it off. This will have a longer-term positive effect on your credit score
  • Closing an account won’t remove it from your credit report
  • Closed accounts will often remain on a credit report as an indication of credit you have had in the past. This means that closing a credit account won’t remove it

Step 15 — Avoid ‘Credit Repair Companies’

Companies that claim to be able to help you improve your credit do not have some sort of magical ability to improve your credit history or score, neither do they have an influence on lenders or your credit history.

A summary of what you should and shouldn’t be doing

Here’s a summary of good things you can do to improve your credit history; do:

  • Spend time understanding your incomes and outgoings
  • Set a budget so that you can afford repayments
  • Work out what you owe, who you owe it to and interest rates
  • Pay off small balances on credit cards and loans quickly
  • Setup automatic payments to pay minimum balances (and more than the minimum balance if possible)
  • Set up reminders to make repayments if you don’t have an automatic payment in place
  • Pay your bills on time, every month
  • If you miss a payment, get up to date as soon as possible
  • Ask your lender if you miss a payment if they would remove it from your credit report
  • Talk to your lenders if you are having problems making payments
  • Reduce what you owe as soon as possible
  • Keep the amount you owe on credit cards to a minimum
  • Miss a repayment
  • Suffer in silence — Speak to your lenders or an ethical debt or credit counselor
  • Go over your credit limit
  • Move debt around
  • Open or close credit, loan or credit card accounts unnecessarily
  • Use credit repair companies

In closing

It’s fine to have credit cards and loans, as long as you’re responsible. If you have a credit card or loan, make your payments and settle the balance in a reasonable amount of time, this will go a long way towards improving your credit card. People with credit cards and loans that they are able to repay are a lower risk for lenders than people with no credit history at all, and this will be reflected in your credit score.

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