Here’s How to Boost Your FICO® Score Organically
To start, Banks and Credit card lenders use several different scoring models to calculate creditworthiness, one of which is the FICO. Since its introduction, FICO® Score became widely adopted by 90% of top lenders.
While it is similar to Credit Score, FICO®’s initial goal was to improve business decisions by using data intelligently.
Payment history and amount of debt are the two biggest factors in determining your FICO® Scores. As such, changes in these areas can have the highest impact.
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The Most Effective Way to Grow Your FICO® Score
If you want to know how to grow your credit score organically, remember to these key ingredients. Your payment history accounts for 35% of your score. The amount of debt extended to you also matters and makes up 30%. The length of credit history improves over time and it counts for 15%. The amount of new credit card debt can drop your score and makes up 10%.
Finally, the variety of your credit mix also says something about you. The last piece rounds out at 10%. When considering your amount of new credit, FICO® Scores take into account how many new accounts you’ve recently opened and whether you’ve been rate shopping for a single loan or applying for multiple new credit lines.
Opening several new credit accounts in a short period indicates greater credit risk.
Credit churning is typical of people trying to game the system and use credit card reward points. Companies became more perceptive about this. They can cut off credit whenever they see fit.
No missed payments
About 98% of FICO® High Achievers have no missed payments at all. However, of those who do, the missed payment happened nearly 4 years ago, on average.
The FICO® Score evaluates if there are any missed payments being reported. Staying current and paying bills on time demonstrate lower credit risk. The more severe, recent and frequent the late payment information, the greater the impact on a FICO® Score.
If you don’t pay, the debt can be sold to a collections agency.
Low Revolving Credit Usage helps your FICO Score
For FICO® High Achievers, the average ratio of the revolving account balances to credit limits is less than 7%.
FICO® Scores evaluate the total revolving account balances in relation to the total credit limits on those accounts. People who keep their ratio of balances to credit limits low pose less risk to lenders than those with higher ratios. FICO® High Achievers have an average of 3 accounts carrying a balance.
Recent Credit Card Usage
Using your credit card is good. Sounds crazy but they extend credit to people who use credit.
FICO® Scores evaluate the mix of credit cards, installment loans and mortgages. People who demonstrate recent and responsible use of credit cards and/or bank-issued open-ended accounts are generally considered less risky to lenders.
FICO® High Achievers opened their most recent account 2 years, 7 months ago, on average. Additionally, most FICO High Achievers owe less than $2,500 on revolving and/or open-ended accounts such as credit cards, charge cards and department store cards.
On time Payments to boost your FICO
Having a sufficient number of accounts is good but what is important is that you pay them on time. These are agreements based on trust. If your score is low, most people cannot trust you with their money.
FICO High Achievers have an average of six accounts currently being paid as agreed. FICO® Scores consider the number of accounts that are being paid as agreed.
Staying current and paying bills on time demonstrates lower risk.
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