Though professionals may have useful advice, there are a number of ways to improve your FICO score. Because the exact formula is not known, the following suggestions are not guarantees, but nevertheless are likely to result in a higher (better) score:


1. Check credit reports for accuracy

The first strategy to pursue in improving a FICO score is recommended by every credit repair organization and credit bureau.

Get your free annual reports from if you don’t have them already.

Find any inaccuracies in your reports. Credit reports are notoriously inaccurate. Check all information, not just information marked “negative”. Even incorrect neutral information may weigh negatively on your report. For example, if your credit limit is stated incorrectly low, it will appear that you are using a higher percentage of your total capacity. This will lower your score.

Dispute these inaccuracies immediately. You may dispute with the creditors directly or with the bureaus. Creditors tend to have live operators while bureaus do not.

Many sources recommend filing disputes with bureaus through certified “return receipt” mail. Disputes can also be filed on the credit bureau’s websites, though the options are somewhat inflexible on these sites. This usually works for information that is genuinely incorrect.

2. Punctuality

It goes without saying that punctuality will improve your FICO score. Punctuality will not help in the short term, but over the course of a year, paying bills on time will increase your score by roughly 30 points, and, more importantly, will prevent your score from dropping.

Pay bills on time, since any payments more than 30 days late will affect the credit score. Note that a bill issued March 15 with a due date of March 31 does not become 30 days late until April 30, but if you have the means, pay earlier rather than later. A single late payment may result in a drop of over 20 points.

Later payments have increasingly worse effects on your score, so pay off late bills as soon as possible (after negotiating to have derogatory remarks removed from your report). Additionally, “collection” accounts are much worse than late payments. Accounts usually go into “collection” status after about six months of non-payment.

Set up as many automated payments as possible. This will help avoid neglecting to pay a bill in the future (be sure to maintain enough funds in the bank account making the payments). Payments by internet are also much quicker than licking a stamp and dropping an envelope in the mail.

3. Cleaning up derogatory statements

Negotiate with collectors and businesses to remove any late payments or collections from a credit report. Often, collectors will happily remove notices off a credit report in exchange for prompt payment. Many collection agents are paid on commission and will bend every rule to be paid. It is important for consumers to obtain any agreement in writing, as once collectors have been paid off it is mostly impossible to have statements removed. Small billing offices, such as medical billing offices, are less by-the-book and often open to removing late remarks from bills paid in the past.

Businesses will usually remove negative remarks in exchange for more business. This works best when the credit branch of the business is closely connected to the sales branch, and when you are a significant customer. Businesses have little interest in preserving the accuracy of a customer’s report for other businesses to review.

If you have federal student loans that fell into default, pursue loan “rehabilitation” policies. Labels of “collection” or “default” will be removed from a loan’s history with regular payments over the course of a year. This needs to be arranged ahead of time.

Per-campus student loan programs will often make exceptions and remove negative remarks if you find the right person to talk to. A good justification for a late payment (“I never got the bill”) never hurts, but remember that most excuses will not have legal merit (expect responses such as “It was your responsibility to pay, even if the bill never arrived”). Appealing to human decency and sense of campus community are vital. If lower ranking officials refuse to help, letters to higher ranking campus officials may find success.

Be polite, and once in a blue moon things will be removed without hassle. Often collectors are unhappy people due to constant conflict. Other times they work in overseas call centers and feel little connection to the people calling them. Treat them as human beings and they may respond with reasonable negotiations. Nothing is gained through combativeness or disrespect in the first few contacts.

When none of the above work, threaten and/or pursue legal action. Collectors and businesses have nothing to gain by reporting negative information about you. Even a minor legal interaction can cost thousands of dollars. Many businesses and creditors would rather remove items than deal with a lawsuit. Even bureaus themselves can be threatened, however, many consumers threaten and do sue credit bureaus, so the credit bureaus are somewhat accustomed to such threats. Threats to write the FTC and Congress also have limited effect.

If the above approaches do not apply or fail, file disputes of negative marks on a credit report. Even if the negative marks are accurate, some creditors fail to respond to disputes in a timely fashion, which removes negative marks. Rather than pay the postage it takes to respond, some creditors disregard any communications regarding paid accounts. It is mail fraud to falsely dispute an item, but as long as you claim to believe an item was never late, feel free to dispute.

4. Decreasing credit capacity used

Decreasing the ratio of debt to credit capacity consists of two major approaches — increasing total capacity and decreasing your debt.

Increase limits on credit cards. The FICO formula weighs the ratio of balances to available credit, so if credit limits are increased while balances stay the same, this ratio drops and your score increases. If possible, try to increase limits without triggering credit check, as a credit check will drop a score by roughly 5 points.

Use relationships with banks and other businesses. Banks will often remove late notations for valued customers. When a consumer is turned down for credit cards elsewhere, a bank will often provide a low-limit credit card. This card will increase capacity (decreasing the capacity used ratio), even if only by a small amount.

Consider secured credit cards. Secured cards factor into credit scores in fashion identical to unsecured cards. If a consumer opens a $1000 secured credit account, the resulting credit report will make it appear that someone has trusted that consumer enough to extend him or her credit, and increase your capacity by $1000.

Pay down the sum of all balances so that you are using the least total capacity. Using 30% of your capacity will trigger a reduction in score. 50% is more severe, and can cause a drop of over 10 points. 75% is a major red flag.

Pay down each individual balance. It may make sense to move balances between cards so no single balance is at more than 30% of its capacity. The 30% line may be difficult to reach — try to increase credit limits, or at least reduce card balances to less than 75% of capacity. This contradicts the advice many credit companies give when trying to get new customers to transfer balances, managing line usage below these thresholds will lead to a higher score than consolidating everything into one credit line and maxing it out. This will require more bills to be paid each month, so requires extra work on the part of the consumer

During mortgage refinances, you may be able to move some credit card debt to your home loan, sometimes by withdrawing equity.

Keep an eye on how student loans are reported. Student loans are notorious for being reported multiple times, making it look like one’s monthly payment obligations are higher than they actually are. This can both help and hurt — a credit report will show more obligations, but if these loans are in good standing, you will show a good repayment history. If a loan is reported as paid late multiple times, make sure to remove the duplication.

5. Establishing credit history

Trying to get rent and utility payments factored into one’s credit score as nontraditional credit if the person otherwise has no established credit.

Use relationships with banks and other businesses. Banks will often extend credit cards to their customers, even with less-than-perfect credit. Businesses such as Home Depot often have financing plans available which don’t require squeaky-clean credit. Though they take on some risk with these loans, the businesses stand to gain immensely if you become a repeat customer.

Take out a car loan. When buying a car, even if you don’t need a loan, take a small fraction of the car’s cost out as a loan. Loans like these are secured by the car itself, so in the event of failure to repay, the financing company won’t suffer much loss.

Becoming an authorized signatory on one or more of one’s parents’ credit cards that they carry a balance on. If the parents pay it responsibly, the authorized signatory’s credit score will benefit, whether he personally charges anything to the card or not. This tip is especially useful for young adults with little or no established credit. According to Suze Orman, if you join an account that has been open for 10 years, your report inherits the full history of that account.

Trying to maintain at least a minimal amount of credit activity, because it has been shown that consumers who maintain a minimal amount of credit are less likely to default on a new account than consumers who don’t maintain credit

6. Minimizing damage in difficult times

Negotiate with your creditors. Discuss your situation and express willingness to pay. If you can commit to a firm repayment schedule, creditors may be willing to skip reporting any delinquency.

Paying the higher payment if a cash crunch makes it necessary to choose between paying two bills. For example, if an $800 house payment and a $300 car payment are due, and the person can only lay hands on $800, it will work out better for their credit score if they pay the house payment.

Avoiding bankruptcy, since that will be a derogatory item in the credit report that lasts for years. Anything is better for one’s credit score than bankruptcy – even working with a credit counseling service to get everything paid down.

7. Limit credit inquiries

Avoid causing inquiries to be posted to one’s credit report. Credit score is affected by recent inquiries made against one’s credit report for the purpose of evaluating an applicant for creditworthiness, including insurance. The credit score is not affected by obtaining a copy of one’s own credit report, nor by “promotional” inquiries made by direct marketers such as credit card companies who send out prescreened direct mail offers, nor by “account review” inquiries made periodically by your own financial institution to manage the ongoing risk of your account. Only the action of applying for new credit or insurance creates a “hard” inquiry on one’s credit report that affects the score. This typically drops a FICO score by roughly 5 points, which remains for as much as two years.

When applying for credit, refuse to allow the creditor to check your credit until the latest possible stage of your transaction. While shopping for a mortgage, generate your own FICO score and use that score in discussions.
source: wikipedia