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Step Five: Improving Your Credit Score
Here are the items that make up your FICO® credit score
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35% of your credit score is based upon payment history: Whether
you paid on time and the seriousness of any delinquencies.
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30% of your credit score is based on the amounts you owe, including
the percentage of the credit you have available versus what you've
actually used.
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15% is based upon the length of your credit history. This takes
into account how long you've had your accounts and how long it's
been since your last activity.
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10% of your score is based on new credit: opening
new accounts and lender "inquiries" or requests for your report.
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The final 10% is based on the type of credit you have. Whether it's
a store account, credit cards, installment loans, mortgage debt or consumer
finance debt. Some types of credit are better than others. To
learn more, go to www.myfico.com
Credit Score Positives
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Make all payments on time.
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Pay any installment loans (auto payments, student loans) you still have on
time, every time. Making payments on time is one of the best ways
to restore your credit.
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Make all payments on time.
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Pay extra when ever possible. Showing you can pay off existing debt
is a great way to improve your credit rating.
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Make all payments on time.
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Pay off any charges you make in full before the due date, you do not need
to carry a balance to raise your credit score, just make all payments on
time.
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Make all payments on time.
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The longer you've had the account the better. New credit
is not as good for your score as credit you have had for a long time.
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Make all payments on time.
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If you do get behind, get current and stay current.
Credit Score Negatives
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Avoid poor forms of credit that may negatively impact your score (rent-to-own,
pay day loans, store accounts, finance companies).
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Avoid using more than 30% of your credit limit on any account.
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Avoid "moving debt" from one lender to another. It
is much better to just pay it off.
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Avoid opening a great deal of new credit that you don't need just to
rebuild your credit report. This can have a negative impact.
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Don't close unused accounts just to boost your score; it can backfire
in the short run.
Be patient. Take the necessary steps and then give it a bit of time
for your track record to age. You'll be happy with the results!
In conclusion, remember that your credit score is only the largest single factor
used in lenders' decisions. Each lender has its own lending policies
that may include your ratio of debt to income, job length and other factors. The
most important things to remember are:
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To use credit wisely to reach your most important goals,
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To be sure any use of credit fits comfortably into a balanced spending plan; and
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Not to look for credit anticipating that you'll get only inferior loans. There's
a big market place and your report and score will be improving all the time. Search
for a good deal, give it time and you will get one, regardless of the bankruptcy.
Remember, if you don't trust your ability to stick to the "positives" and
avoid the "negatives" listed below, then do not get a credit
card or other revolving credit. Try www.PRBC.com if you must have credit, otherwise
save to pay cash and avoid credit entirely.
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