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Jim Guido's Blog

By Jim Guido | Agent in 95125

How to pump up your credit score

To avoid another real estate bubble, many lenders have tightened their mortgage requirements.
According to a report by the Federal Reserve, a majority of banks are less likely to offer loans to
people with a FICO score of 620 and a 10 percent down payment than they were in 2006.
Lenders were also less likely to do so even for those with a score of 720. The good news
though is there are some tactics that consumers can employ to raise their scores.
Making sense of the story

ï‚· First, it is worth noting that median credit scores are rising, as people reduce debt and
spend less in tight economic times. Some 18 percent of Americans now have scores of
800 to 850, while 15 percent are below 550, according to FICO data.

ï‚· Often lenders will review FICO scores from the three big credit agencies, and they use
the middle number to evaluate the borrower. That number becomes the borrower’s “risk

ï‚· Borrowers can figure out their risk number by obtaining their three credit reports,
available free once a year at AnnualCreditReport.com, and studying them carefully for
errors or omissions.

ï‚· According to FICO, the two biggest factors in a credit score are payment history, which
accounts for 35 percent of the score, and the amounts owed, accounting for 30 percent.

ï‚· Knowing that information, one can raise his/her credit score by reducing balances on
credit cards. However, if an account is in collection, it is too late to improve the credit
score by paying it off. The notation that an account is in collection is what lowers the
score, so consumers may get more mileage by paying down active credit-card balances
and other debts first.

ï‚· Though mistakes and bankruptcies may stay on a credit report for seven years, lenders
will generally be more likely to overlook late payments that happened two or more years
ago than more recent ones.

 Improving one’s credit score could take three to four months, or it could take as long as
18 months.

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