The New Year is upon us and what better way to kick it off than to improve your credit? Improving your FICO score for 2021 comes with many benefits. It can also be easier than you think. We’ll tell you more below.
1. How Your FICO Score is Calculated
A FICO credit score is based on a particular set of factors that make up a certain percentage of the overall score. A benefit is that it gives you the ability to manage your credit score in a positive way. But you have to know how. Here are the five criteria for your credit score:
- Payment history makes up 35% of the score.
- Amount or amounts owed makes up 30% of the score.
- Credit history length makes up 15% of the score.
- New credit makes up 10% of the score.
- Your credit mix makes up 10% of the score.
2. How to Improve Your FICO Score
It is essential that all five elements above are kept as up to date and low as possible. For example, your payment history takes into account how often you pay your bills on time, the number and length of delinquencies, and any bankruptcies, liens, etc. against you. Be sure to address any late payments and judgements against you as soon as possible to increase your score. In addition, any outstanding debts can impact your score negatively. This even includes legitimate debts like your home, car, student loans, medical bills, and more. Credit history length takes into account how many lines of credit you have open and how long they have been open. Have an account you don’t use? Thinking about getting a new card because it offers such great introductory benefits? Think carefully before taking action.
3. The Benefits of Improving Your FICO Score
Many benefits come along with a good FICO score, ie one of 690 or more. It allows you to access higher loan amounts and credit limits when needed. You will pay lower interest rates on most of these. You can even save money on insurance premiums and qualify for certain leases. Did you have a bad credit score in the past but now it’s better? Contact your existing creditors to negotiate better terms.
4. FICO Score Facts
Here are a few facts to get you started:
- The average FICO credit score in the United States was 711 in 2020 up from 203 in 2019.
- In 2020 you needed a credit score of approximately 660 to purchase a vehicle.
- Those aged 23 to 29 had the lowest FICO scores at an average of 660.
- Those aged 80 to 89 had the highest FICO scores at an average of 757.
Read more stats on FICO scores by clicking here.
Houston Bookkeeping & Improving Your FICO Score for 2021
Feel free to contact us to get help get your personal or business finances in shape.
