How to Improve Your FICO Score

Before we begin, it is extremely important to note that there are no quick fixes for increasing your credit score especially for items that may be present for years like bankruptcy. There are however, chances for a boost in score when you can instantly pay off your credit cards and all pending bills. But, for good credit history you will have to be diligent over a period of time.

History of the FICO Score: The FICO score was developed by Fair Issac in the 1960's to score an individual's credit risk. Today this score has simply become the standard for most lenders.

FICO score simulators are composed of more or less five key elements which include - past payment history, the balance owed, length of credit history, total amount of new credit plus the type of credit used. So, just how does this calculation break down? Well, the calculation can be as follows - Past payment history 35 percent, outstanding debt 30 percent, length of credit 15 percent, new credit and type of credit are each typically worth 10 percent apiece.

You should be aware that your score is reduced by 15 to 40 points for each delayed payment over 30 days. If you have reached or exceeded your overall credit limit, you will get a low score in spite of having no late payment charges. Maintain a long credit history, it is better for you. If you've been applying for new credit or opened more than a couple of new accounts it would found objectionable, and your score would reduce.

Here are some valuable tips to maintaining a good FICO score. . .

a) Focus only on getting just what you need - this is the first step in reducing debt that needs to be repaid.

b) Pay your bills on time - Every delayed payment causes a negative effect on your score, therefore clear as many bills as you can on the due dates.

c) Pay Cash - this helps you understand how much you're spending and reduces the total amount you spend.