Improving Your Credit Score

The "Road to 850" is the title and author Al Bingham's talking about the goal to obtain the perfect credit score.  But even he admits he hasn't seen an 850 in all the credit reports he's poured over.  He says you'd need 45 plus years of amazing credit history to reach that number.  But he says what we all should strive to get is at least an 760 or higher.

Interested in getting a personal plan of action to raising your score?  Al Bingham has offered to work with a few of our viewers to raise their score.  Email me your story to ConsumerWatch@News9.net.  Include in it why you want to raise your score and why you think it might need some work.

In general, Al says take these steps and you'll see an improvement:

1.  Track your true FICO® credit score.
Most lenders, insurance companies, employers and other financial service related companies pull your credit score from FICO® or Fair Isaac Corporation. These scores can be found at www.MyFICO.com  or with your lender.
Other companies including the major credit bureaus have created and sell their own credit scores that are substantially different from the FICO® credit scores. In fact, the research firm Towergroup, estimates the three major credit bureaus will make an $864 million this year by selling their own credit scores.  These scores try to mimic the FICO® credit scores, but they can be 40, 50 or 60 points different from your true FICO® scores. Just one point difference can cost you thousands of dollars.
Track your true FICO credit scores from a reliable source.

2.  Review your credit report for mistakes.
Several recent studies show that most credit reports have errors in them. Since one simple and unnoticed error can easily cost you 100 points or more to a credit score, you should review your credit report line by line to make sure the information is correct.
The three major credit bureaus pull information from thousands of companies and courts nationwide. Because of the amount of overwhelming information, mistakes can and do occur often. You should look for any misplaced accounts, incorrect loan balances and an inaccurate payment history.
3. Create golden accounts
Depth is a huge driver to a FICO® credit score. The longer your current accounts have been open, the higher your credit score will go. This is the one strategy that will build your score to an 800 score or higher.
Identify your longest active credit card or revolving accounts in your credit report. Use them at least once a year and increase the time they have been open. Try to have at least two to three lines of credit open for at least ten years. They will become a positive factor for your FICO® score.
4.  Reduce your debt to a minimum
You can easily drop a credit score 150 to 200 points by an excessive amount of debt. Look to reduce the balances on your credit cards to at least 50% of your high credit limit, and the number of credit cards and other lines of credit that carry a balance. There is a common statement on debt; more is less and less is more - the more debt you have, the lower your FICO® score while the less debt you have, the higher your score.
5. Limit the number of new accounts
Beware of those instant discounts from the department store or lowering your interest rates with another credit card. When you open these types of accounts, your credit score can easily drop significantly within a month or two.
Once you have an established credit report, look to minimize the opening of new accounts to one per year. This will prevent any sudden drop with your credit score.

***You can get your credit report for free once a year by going to www.annualcreditreport.com (You still have to pay for the score by going to myfico.com).

On a personal note...
I'm like most of you.  I pay my bills on time.  I've never been late on a house or car payment.  I have a savings account.  That's why I was pretty shocked when I saw my credit score was "average".  Not to mention I was a little put off by the fact that my husband's score was "good" (and I'm the saver in the family!) :)  It's not until I had someone who knew what they were looking for pour over my credit report that I got some clues as to why my score was less than it should be.

For 1, I only have 1 "Golden Account".  Al Bingham, author of "Road to 850" says those are accounts that have been established for 10 years or longer and they are what build your score.  A piece of advice he gave me, one I'm about to take, is he told me to add my name to my husband's 2 credit cards.  I'm the one who pays them, so I might as well get some credit! 

I'm also tempted by those offers to open up a credit card at a department or hardware store if I get 10-20% off my purchase.  I thought it was alright, since I'd just pay the card off right away.  But Bingham says to be careful with this.  You don't want to go overboard.  He says limit yourself to opening up 1 or LESS lines of credit a year.

I'm going to make some changes, and then pull my number in a few months... I'll let you know if I see improvement!