Boost Your Credit Score

Because 30 percent of your FICO score is based on amounts owed on revolving credit, I can't say it enough: watch your balances!

ANATOMY OF A FICO SCORE

35% payment history
30% amounts owed on revolving accounts
15% length of credit
10% new credit
10% types of credit

Being over your limit or near your limit on revolving accounts will detract points from your score. Revolving accounts are credit cards and lines of credit. I get asked all the time: what if I pay off my auto loan? It will make no difference. It will not affect your FICO score. FICO is only concerned with how consumers use their open lines of credit.

It's simple. Paying down your balances to 20% or less of the high limit will give a boost to your score - sometimes as much as 50 points.....this one step can increase your score within 72 hours!

ONE CAVEAT:

Home equities are revolving balances. In other words, home equity loans do not report as an installment loan like a regular mortgage. Because paying down a home equity is not an option for most folks, consider asking your bank to recode your home equity as a mortgage. If they won't, consider getting a second mortgage to pay off the home equity. It will make a difference in the long run.

 

 

 

Follow Jeanne Kelly on Twitter: www.twitter.com/Creditscoop

Comments

[techBob]

11:07 PM on 10/21/2009

Starting just this past August, as soon as I pay down my cards the Banksters drop my line so I'm near 100% now when I was at 15%
previously. I have had over $140,000.00 of available credit taken away for no reason except the banks
can do whatever they like. I'm sure my fico score of 749 is in the dumpster now,. I never missed a payment, never went over limit, never borrowed a penny I did not intend to pay back early. Everything was going acording to my plan until this past August when the banks decided they no longer wanted to abide by any agreements they had made with me. truning fixed rate agreements to variable, raising rates, tripling minimum monthly payments to name a few tricks I've experianced.
Your advice is dated, in today's economy it doesn't work that way any more. Pay off a card the bank will lower your limit or close the account on you. There is no winning only staying afloat., barely.