Your Credit Score

Your Credit Score

I get asked all the time, “What is the one thing I can do to improve my credit score the fastest?” Now my answer is, “Usually it depends, but good advice for anyone is to always pay down credit card debt.” This is the easiest and most efficient way for most people to quickly improve their credit score. A very important piece of your FICO score is balance-to-limit on revolving accounts (credit cards). More people quote poor advice about this piece of your score than anything else.

The two things you need to know are; the lower percentage of your credit card you are using, the better. And the second thing to know, if you are crunched for time you need to pay the extra on your card before the billing cycle ends. If you are not sure when your credit card’s billing cycle ends, check your statement or call the company and ask.

Let’s assume that I want to buy a house and I only have a month till closing, but also let’s assume if my FICO score were 10 points higher my loan would be approved. In this situation I have a few choices but the best choice I could make is to take some money and apply it towards my credit card debt. However, I want to make sure I know when the billing cycle ends. If I don’t know this date, my efforts might not do me any good. This will also prevent me from being able to help my Mortgage Loan Officer in letting them know when to pull a new report.

If I know the date the billing cycle ends, I will take all the money that I can apply towards this debt and make that payment a few days before the cycle ends. Then I will tell my Mortgage person to pull my credit report a few days after the billing cycle ending date. By doing this, the new updated (lower) balance will now be reporting on my report and my FICO score will calculate off that, which in most cases will improve my score and make everyone happy now that I am approved to be a Home Owner!

It can be a relatively easy process with just a little education and proper planning instead of just guessing and then being frustrated when my score doesn’t improve the way I had hoped it would. Balance-to-limit is extremely important on revolving accounts, be careful about this number.

A lot of people wrongly assume that as long as I pay my bills on time my FICO score will be good. Unfortunately it is not that simple. If you want to score the best you can in this area of your score, 7% is the magic number. Meaning if I have one credit card with a $100 limit, the best thing I can do for my score is to have my balance at 7% of $100 or $7. Remember this tip, it just might allow you to qualify for your dream home now!


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