Money Talk: Six ways to achieve a better FICO score and meet your financial goals
William Mandrell | 6/8/2017, 6 a.m.
Are you looking to buy a car, house or have other major upcoming expenses in your life? Are you afraid you won’t be able to achieve your goals due to a less than perfect credit score? Don’t stress! We’re going to provide you with 6 easy tips for improving your FICO score and getting on the path to success.
1. Pay down your credit cards to below 40 percent. Ideally 30 percent but let’s start small and work our way up. It can be overwhelming if you have 5 credit cards that are all near their limit. Here are a couple strategies you could employ. A. Pay off/down the highest interest card first. The money you save on interest payments will go toward paying off your next card on the list. B. Pay off/down the credit card with the smallest limit. Paying off something quickly gives you motivation to move on to the next. You feel motivated after paying down a $500 credit card in 2 months compared to paying $500 off a $5,000 credit card because you still see a high balance.
2. Slow down on opening new accounts. Each new account places an inquiry on your credit report, which decreases your credit score. When creditors see these inquiries, it decreases your chances of being approved. Also, new credit means less credit history, which is frowned upon. Side note: Choose cards with rewards so you earn while you spend.
3. Add someone’s credit history to your profile. If you have a family member that has good credit and good credit history, consider asking them to add you to their oldest credit card and preferably the one with the best credit history attached to it. While you will not adopt their credit score, you will obtain their history, so if they have owned the card for 10 years, you now have that 10-year history on your credit report. We DO NOT recommend you having access to their credit however. No matter how good your intentions, you never want to jeopardize someone’s credit for your own gain. They can give you their history without giving you access to their credit.
4. Get a secured line of credit. If you were unable to add someone’s credit history to your profile, your next best option is to open a secured line of credit. Essentially, you would put money on a card (like a debit card) and whatever amount you deposit, becomes your new credit limit. For example, you deposit $500 on your secured credit card, you now have a $500 credit limit on your card. If you decide to increase it to $1000, you pay the $1000 upfront and you can borrow against it up to $1000. The benefit is that if you decide to close the account, your money is refunded. Also, secured credit cards report to the credit bureaus unlike a debit card or some other services out there. Do your research and ask questions. See which card is best suited for your needs. The most important thing is to make sure they report to all 3 credit bureaus to help you establish credit.