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What can you do about your FICO Score and how is it determined

By Brian Anderson
Published: Wednesday, June 8th, 2011

What can you do about your FICO Score and how is it determinedMany of us try our best to get the best APY on our investments, which is a good thing. However, the money should also work the way it is supposed to and in order to do that you must ensure that it can beat the existing inflation rates, so that you don’t end up losing the value of your hard-earned money. But if you are carrying forward a huge balance on one of those high-interest credit cards or have other loans with high-interest rates, the 4% savings that you get will quickly get nullified due to the high-interest rates that you would be paying on your loans. Even during a credit crunch only those who have a high credit card rating can avail loans at reasonable rates – that is if at all they can get them. Even though some of the financial experts claim that the recent credit crunch is almost over and credit will start pouring in again, there is one bitter pill that you have to swallow which is – the FICO score and everything literally depends on that score. When you have a high FICO score, you can be assured of low interest rates on your credit cards and loans.

These days even insurance companies go by the FICO scores of individuals in order to get the credit-based insurance score that can have a huge bearing on your insurance premium costs. So, how is it possible to raise the FICO score? The balances on your cards and the payment history generally make up at least 65% of the FICO score and hence it is important to understand that these are the two important components in getting a good FICO score. Since payment history makes up for around 35% of the score, it is important that you make timely payments in order to avoid a dip in your scores. In case you have already had some late payments sometime in the past, you can be rest assured that it will fade with the passage of time. So, all you have to focus on is the timely payment now, as that takes precedence over the past payment history.

The balances on your credit card makes up to around 30% of the credit score. Hence, it makes sense to pay off your balances in the quickest possible time as this will help raise your credit score. One must realize that using credit and carrying a balance are two different things altogether. Credit scores also analyze the way you use your credit.

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