Some simple steps you can take - without paying for "credit repair"
updated 5/29/2007 11:16:12 AM ET 2007-05-29T15:16:12
Maybe it's the rising tide of spam offering "credit repair" but a number of readers have been asking lately how they can increase their credit scores. Before you go pay someone to give you advice you can get for free, check out these simple steps you can take to build better credit.
How would a person go about repairing their credit score when it is low?
— M.P. Bryan, Tex.
I'm trying to raise my credit score. Is it better to pay off credit cards and close them or leave them open with credit available showing?
— Tea C. Newark, Del.
Unfortunately, it's a lot easier to lower your score than it is it raise it.
But there are a number of things you can do to try to
raise your so-called FICO score, named for Fair Isaac and Co. the company that created this credit rating system now widely used by lenders of all stripes for a quick read on your creditworthiness.
While the system is widely used, it’s far from perfect. Good lenders use it as a starting point, and each one has their own ideas about how high your score should be. They may also base their decision on other information not contained in the score — like how long you’ve lived at your current address or held your current job.
In general, you’ll pay higher interest rates the lower your score. In theory, the lower your score, the higher the risk to the lender that you won't pay the loan back. FICO scores range from 300 to 850; the median score is 723. To get the best rates, you’ll usually have to have a score of at least low- to mid-700s.