Everyone took a hit in one fashion or another during the downturn in our economy. Many individuals are now faced with less than stellar credit scores as a result. In an effort to offer some sound advice, I asked my colleague Mark Therriault - Executive Mortgage Banker at William Raveis Mortgage LLC located at 2 Huntington Street in Shelton for some tips.
Here is what Mark suggests:
1) If you have missed payments, get current and stay current. The longer you pay your bills on time after being late, the more your FICO score should increase. Older credit problems count for less, so poor credit performance won't haunt you forever. The impact of past credit problems on your FICO score fades as time passes and as recent good payment patterns show up on your credit report. Good FICO scores weigh any credit problems against the positive information that says you are managing your credit well.
2) Keep balances low on credit cards and other "revolving credit". High outstanding debt can affect a credit score.
3) Pay off debt rather than moving it around. The most effective way to improve your credit score in this area is by paying down your revolving (credit cards) debt. In fact, owing the same amount but having fewer open accounts may lower your score.
4) Don't close unused credit cards as a short term strategy to raise your score.
5) If you have been managing credit for a short time, don't open a lot of new accounts too rapidly. New accounts will lower your average account age, which will have a larger effect on your score if you don't have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user.