How to Improve Your Credit Score, Straight From FICO and VantageScore

4 minutes read

Lenders have been using FICO or VantageScore credit scores in assessing mortgage applications. They primarily rely on these scores to determine the rate a borrower applying for a mortgage will get. Credit scores are a reflection of your credit report, a log of your credit activities in the past.

We have thus gathered a handful of tips found on FICO and VantageScore websites in improving your credit score and ultimately boosting your access to better mortgage rates.

Share your mortgage plans with us.»

HOW IS A CREDIT SCORE CALCULATED?

FICo and VantageScore have their own method of calculating credit scores based on the information on credit reports. Pay attention to the components and the corresponding weight that make up a credit score at each of FICO and VantageScore. Take a look.

FICO Score VantageScore Component Weight Component Weight Payment History 35% Payment History 40% Total Amounts Owed 30% Depth of Credit/Length of Credit History 21% Length of Credit History 15% Utilization of Credit 20% Types of Credit Used 10% Balances 11% New Credit 10% Recent Credit 5% Available Credit 3%

CREDIT SCORE IMPROVEMENT TIPS 101

Now, let’s focus on the behavior that would have a positive influence on your credit score and improve it over time.

1. Pay bills on time. Your payment history takes up 35% at FICO and 40% at VantageScore. If you’ve been timely in your bills payment, you are handling your debt wisely.

FICO suggests that setting up a payment reminder so you can promptly pay your bills. Automate payments on your existing debts using your debit card.

VantageScore reminds about not missing out on any payment. Your first late payment entails a slight drop but being late on other debt payments signifies a credit risk and a huge score drop.

We can help you shop for loans and rates.»

Even with missed payments, you can strive to remain current on your accounts. Delinquency could land your account in collections, which takes seven years to remove.

2. Carry sufficient debt. It’s okay to owe money but you can only carry as much. Total amounts owed is 30% of your FICO score while in VantageScore, this equals to: 20% for utilization, 11% for balances and 3% for available credit.

According to FICO, reduce the total amount you owe by not using your credit cards in the meantime or paying down some of your debts starting with those with the highest rates. Paying off some debts might be wiser than moving it around. If you do the latter, you end up with the same amount owed but with fewer accounts which could lower your score.

VantageScore advises to not use all of your available credit and if you do, keep your outstanding balance below 30% of your credit limit across all accounts. By keeping your debt at that level, you will appear to the lender as someone with sufficient access to credit without straining for additional funds.

We have access to a network of reputable lenders.»

3. Apply for credit prudently. New credit constitutes 5% of your VantageScore and 10% of your FICO score. It also affects your depth of credit of 21% at VantageScore and FICO’s length of credit history of 15%.

Per FICO, new accounts are useful to build or rebuild your credit by paying your bills on time. But don’t open too many accounts in a short span of time if your length of history is fairly new. It’s also okay to shop for rates within a certain period of time, with inquiries leading to a single loan instead of multiple credit lines.

VantageScore recommends applying for loans only when you need it. Also, avoid having too many new accounts at once because it could cast doubts on your ability to manage them.

4. Maintain a good mix of debts. FICO allots 10% for a good credit mix of revolving debt like credit cards and installment debts like car loans, home loans, and personal loans.

To VantageScore, having a good mix shows you are an experienced credit user. FICO, however, warns about opening new credit lines just for the purpose of meeting the credit mix criterion as it might not raise your score.

Facebook Twitter LinkedIn Telegram Whatsapp Pocket

Related Posts:

The FICO credit score model allows consumers to have a credit score as high as 850. Do people actually have this score? While it’s achievable, it’s not all that common. That’s why lenders often consider any credit score over 720 as ‘excellent,’ giving them the most favorable terms on their desired loan. HOW TO GET THE BEST POSSIBLE CREDIT SCORE So how do you go about achieving a credit score as high a...
Your credit score can make or break your ability to get a loan. So what do lenders consider a ‘good credit score?’ It can vary by lender, but on average, most lenders consider scores over 700 good. Of course, the higher your credit score the better off you’ll be. While rare, some people do have credit scores over 800, which is considered excellent. Compare Offers from Several Mortgage Lenders. HOW LENDERS...
Unpaid medical bills are a funny thing when it comes to your credit. Not every unpaid bill will negatively impact your credit, but if you let them go long enough, your score could suffer. Knowing exactly how and when you should get your medical bills paid can help you prevent your credit score from suffering too much. WHAT DOES UNPAID MEDICAL BILLS MEAN? The first thing to understand is what unpaid medical bill...
Your credit score could fall anywhere between 350 and 800. It’s safe to say, though, if you fall on the lower end, you’ll have a hard time finding a mortgage from any lender. That doesn’t mean you won’t find a loan, but finding a conventional loan would be next to impossible. According to Ellie Mae, the average borrower has a 752 credit score when buying a home with Fannie Mae financing. The average bo...
If you have a VA loan now, you may have a way to refinance it even if you have bad credit. Compare Offers from Several Mortgage Lenders. Typically, lenders require you to have a minimum credit score in order to qualify for a refinance. It makes sense since the lender needs to decrease their risk of default. But with the VA streamline refinance, the VA doesn’t require lenders to verify your credit score, home ...
You paid off your house a while ago and have enjoyed being mortgage free. However, in recent years you hit bad luck and ruined your credit. Now you want to tap into your paid off house and get some of that equity back in cash to help make ends meet. Is it possible with your bad credit? REFINANCING A PAID OFF HOUSE You must know that the bad credit you accumulated may hurt you. Certain lenders will not even cons...