Looking for a new apartment? Well in addition to looking at your references, it is pretty likely that your landlord will take a peek at your credit score. For years figuring out how to boost your score was rather hit or miss. Recently however, the Fair Isaac Corporation (the company behind the FICO credit score) released some stats and information that shed light on how it all works.
How much credit you are using, plays a very real role in your credit score accounting for just about a third of your score. It’s known as your debt to credit ratio. Individuals with the best credit scores (785 and up) have on average seven credit cards in their wallet and use just 7% of their credit line.
Increase your credit
There are a few things you can do to tweak your credit score if you are concerned that you are using too much of your available credit. A simple solution is to ask your bank to increase your credit line. You can also apply for a new credit card. Here it pays to do your homework using online resources to find a card that’s a good match for you.
This is not an overnight solution though; individuals with a high credit score usually opened their last credit card account over two years ago.
While you may think that having debt on your credit card will pull down your credit rating, that’s not exactly the case. You do need to have a credit history, and the longer it is the better.
The FICO Elite
At least 33% of individuals who are in the FICO elite have at least four credit cards or non-mortgage based loans with at least $8,500 in debt attached to them. You are probably wondering why having debt helps them. The answer is relatively simple – it’s not necessarily how much debt you have that counts. It’s a matter of how well you manage your debt.
Certain truths still apply when getting scoring a high credit rating, including paying your bills on time. When you look at the stats, 99% of people in the elite category have never missed a payment, and only 1 in 100 has ever had an account in collections. So don’t be late on payments.
If you’ve had some financial issues in the past there is hope, because some members of the top FICO scorers do have collections, tax liens or bankruptcies, on their credit report. But that’s not easy to wipe off your record and it takes time.
This is a guest post from Daniel Tulbovich, the co-founder of Credit-Land.com. He writes frequently on credit-related topics.
