How to increase credit score?

Peter Said:
My credit score did not go up until I established a pattern of making consistent and timely payments. When I first started out I paid cash for everything, had one card for emergencies and a low score. My score didn't start to go up until I took out a car loan. I ended up paying it off early --my interest rate was 14% --but it helped tremendously in building my credit. I'd suggest that he take out a loan or carry a small balance credit card balance and then make consistent and timely payments. Then wait. It'll go up. Oh yeah, the other thing I'd do is pull a copy of the credit reports and make sure that they are accurate.

John said:
Padgett... it's actually better to have a $1 or more balance on your cards... anything up to 10% of your total credit limit is good. A portion of your score is determined by your payment history and how you manage your accounts. If you hold a zero balance with no activity, you lose the benefit to your score of using your credit "wisely".Bande's idea on an installment loan could benefit you as well. Essentially, getting and using credit will boost your score over time. However, in the short term, it could hurt your score. 6 months is short term, but it could be long enough to get a boost if you need it. It's worth looking at that site... but if my memory serves correctly there are 32 total factors in determining your score. For the record, a 680 score is quite good. If you want a true goal from a mortgage standpoint, then 720 should be it. It will get you the best rates and programs for about 99% of the lenders. Some have a 740-750 tier for a smidge better rate.Bande also mentioned looking at your credit, which is always a good idea. This website offers a truly free credit report. www.annualcreditreport.com (do not buy their credit scores for 7 bucks a piece. They do not use the "FICO" scoring model, so the scores they give you are utterly useless and don't apply to anything. The scores they give are often higher than FICO scores, and they use their own model to create them. Lenders do not use their scoring model, which is why they are useless). Once you get your free credit report, you can dispute the items online with them. Typically I recommend only pulling one bureau every 4 months, this way you can get a small snapshot 3 times a year to watch for mistakes. If you are planning a big financial move in the next 6 months, then you should pull all 3.One other note on installment type loans (car loans, mortgages, etc..) They need to be rated for a certain time to get any benefit from them. It's been so long since I've dealt with this question, I want to say it's 6 months. (anyone? - Bande, how long did you hold that loan before you paid if off early?)While getting a couple new credit cards would probably hurt his score in the short term, it would definitely give you the boost you want over the long haul. Just be sure to keep your balances on any revolving debt at <50% of the total credit line. <40% is the best way to go if possible... If you choose to get another credit card, be sure you ask them how they report their high credit limit. For example, Capital One uses a tactic to "protect" their consumers from other competing credit card companies. They report your high credit limit as the highest amount you've charged. They claim they do this to keep competitors from trying to acquire you as a customer. However, consider this... you get a credit card with a $5000 limit, and you charge $1,000 on it. Your high credit limit will now report as $1,000 instead of the true $5,000 it should be. So you now have a balance of $1,000, and a high credit limit of $1,000...ie. your credit line is maxed out, and you take a nasty hit to your score.I always recommend going to your personal bank and getting cards from them if possible. Nearly all of them these days allow you to set up an automatic minimum payment withdrawal from your checking account. This protects you from a late payment (assuming you have money in checking ). Mail does get lost, and people can make the mistake of thinking they sent in the payment, when it's actually buried on the desk out of sight.

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