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Ask Shop Rate: Penny - Illinois

Posted by  on Apr 16, 2009
 
Hi, I am just wondering, is it right for a bank to tell you get a credit card to help improve your credit score? I am in the process of trying to get approved for a home loan for low income in IL and my credit score is 620 now. I have had bad experence with credit cards, and am afraid to get another one. Is there another way to improve credit score with out credit cards? I am paying my bills on time...for the last 4 to 6 months. I am a cash person with checking and savings accounts. Obtaining a credit card and paying the balance in a timely manner is one way to begin to rebuild your FICO (credit) score. The bank may be making this suggestion to build or rebuild your credit in a quick manner.

However, there are several factors that are used to calculate your FICO score. Your payment history makes up about 35% of that score. Unfortunately, negative items and late payments affect your credit rating much faster than positive items. Paying your bills on time is a great start and will significantly improve your credit score, but it will take some time. Four to six months of making all payments on time is a great start! However, it may take 6 to 8 more for you to really see a significant improvement. You may want to order a copy of your credit report and check it for any errors it may have on it. It is very important to correct any false information as this may affect your rating dramatically. Most states allow you to obtain a copy of your credit report for free annually — check out annualcreditreport.com. You can also contact the three major credit bureaus directly (TransUnion, Experian, EquiFax) for a copy of your credit report and to get their suggestions. It is important to remember that each inquiry to your credit history will slightly lower your FICO score. However, checking your own credit history will not be reported negatively.


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