If you have a low FICO score you may be paying more interest on your mortgage, car loan, and credit cards and possibly you’re also paying more on your insurance premiums. Bad? Yes! So why not take a few simple steps to improve your FICO score? But in order to know how to improve your FICO score, you need to first know how a FICO score is calculated. So read here the 5 criteria from what a FICO score is made up of.


The first and most important factor is paying all your bills on time. Mortgage, car leases, credit cards, loans, etc. all get reported to the credit bureau. Therefore, be sure to be on top of all of your bills all the time to ensure that they get paid in a timely manner.

If you are late on payment be sure to pay it as soon as possible. Each additional late day can possibly have a negative effect on your credit score.

When a payment is late, the dollar amount is almost irrelevant. It doesn’t make much of a difference if it is one dollar or a thousand dollars. Late is late.


Credit utilization is how much of your credit line you spent. Banks don’t like it when you max out your credit. Never spend more than 9% of your credit line on each individual personal credit card. Moreover, be extra cautious not to spend more than 50% percent of your revolving credit lines.  It will damage your credit (almost as much as a late payment).

It is recommended to always have one credit card that has a zero balance at any given time.

(Most business credit cards (unlike personal cards) i.e. Amex Open, Chase Ink, etc. do not report to the credit bureau (so long as you’re not late on the payments) so they can be maxed out without a problem).

You can read more about credit utilization here.


Credit history is the length of time you had credit. The older your credit is, the better. That said, it is helpful to have at least three or four credit cards which do not have an annual fee. Keep them open; since the longer you have them, the higher your score.

For more on this read Building Credit History Properly.


Credit mix is how many types of credit you’re able to juggle (the more the better). It is beneficial to have a total of five active trade lines with a mix of installment loans and revolving credit.

Examples of installment loans would be; mortgage loans, car loans, car leases, or any loan which has the same fixed amount to be paid every month.

Examples of revolving credit would be a credit card, line of credit, or any loan that does not have a fixed amount that needs to be paid every month.

You can read more about the credit mix here.

New Credit (10%)

When you get approved for a new credit card your score may go down a bit due to the new tradeline. This effect can last up to six months from the date you got approved.

Each time a credit pull is done, the score may go down a bit for a short while and then go right back up again. However, applying for more than five trade lines during a six month period hurts your credit, so this should be avoided.

Follow these tips and enjoy seeing your credit go up and up. In a short while, you will hopefully be the proud owner of a 760+ FICO score. Good luck!

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