Even if it is just a few days late, just one overdue payment-whether it’s for your mortgage, a utility bill, an auto loan, a Visa account, or any of a hundred other credit obligations-could seriously damage your FICO score. FICO pays a lot of attention to whether you start a pattern of missing due dates, so a series of late payments can really hurt your score.
It’s not too late to straighten up your act. Get yourself current as quickly as you can and then remain current. Your score will begin to increase within six months- and the longer you keep it up, the more noticeable the increase will be. The negative weight FICO gives to bad behavior like delinquencies lessens over time, so as long as you stay on the right path, those black marks will eventually disappear from your record for good.
Of all the factors you are able to control-and improve quickly-the amount you owe is probably the most powerful. Say you’ve got a $1,000 balance on card with a $2,000 credit limit-and then the card company slashes your limit to $1,000. Suddenly, you’ve gone from 50% credit utilization to being maxed out, and being maxed out might cost you as much as 100 points.
Closing old accounts shortens your credit history and lowers your total credit-neither of which is good for your FICO score. If you have to close an account, close a relatively new one and keep the older ones open. Also, closing an account won’t take away a bad payment record from your report. Closed accounts are listed right along with active ones.
A good way to raise your score is to flaunt that you can handle credit obligation-which means not borrowing too much and paying back what do borrow on time. Don’t open new accounts just to increase your current credit or create a better variety of credit. This is especially true if you are just starting to establish a credit history.
When you apply for a loan, the lender will “run your credit”-that is, send an inquiry to one of the credit rating agencies to show how credit worthy you are. Too many such inquiries can hurt your FICO score, since that could indicate you are attempting to borrow money from a bunch of different sources.
The FICO scoring system is designed to allow for this by taking into consideration the length of time over which a group of inquiries are made. Attempt to do all your loan shopping within 30 days, so the inquiries get put together and it’s obvious to FICO that you are loan shopping.
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