How to Raise Your FICO Credit Score

Credit card companies and other entities make a huge deal about the FICO score, and the first thing you should know is that it's not the end of your life if you've made some credit mistakes. But you should know what lenders look for in a FICO score to determine your creditworthiness. You want to raise your credit score as high as you can, hopefully above 760. They get the best rates. Here's how to raise your FICO credit score.

The first step to raise your FICO credit score is to not let others check your credit. That is known as a hard inquiry, and it negatively affects your score. You can check your credit all you want, but new people, like car or home loan officers, should not be able to check it unless you are in the final stages of negotiation. Also, if you are looking for a loan, have all creditors check it within a 14 day period. It will only count as one credit inquiry then instead of many.

The second step to raise your FICO credit score is to know what credit cards to keep open and which to close. It's simple: Keep your oldest credit card accounts open, with a zero balance, of course, and close the rest.

After you have closed the right accounts, take the number down for your maximum available credit. To raise your FICO credit score, make sure you are not borrowing any more than 20% of this number.

After you get under the maximum 20% limit, it's time to start paying your bills on time. To raise your FICO credit score, make sure you pay bills before the creditors come knocking. True, some companies wait until you're 30 days delinquent to report late payments, but don't take that chance.

The last two steps are if you really messed up credit-wise or if you had a real emergency which forced you to borrow more than you would or should have normally. If this is the case, the first thing you should do is to attach a letter of explanation to your credit report. Lenders are people, and they might have had a similar experience. Please make sure the letter is well worded and grammatically correct; you might consider hiring a professional. A good letter is the same as raising your FICO credit score; a bad one can do the exact opposite.

The last step to raise your FICO credit score also has nothing to do with raising the score directly, only the perception of you to the lender as a responsible person, which is really the same thing. Keep statements and reference letters which prove steady income, steady residence and rent payments, and any income you may get from side businesses that doesn't show up as a payroll paycheck. The more money you have and the more responsible you seem through verified statements, the more your credit rating goes up with lenders, because you are a safer bet.