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As I tried to improve my understanding of Credit Score by watching some educational videos on youtube..

The calculations in figure are for an auto loan of $25,000 - Notice the higher monthly installment payments for low Credit scores.

Fig from myfico.com

Like wise, you will save higher for higher loans with longer payback period. The savings could be anything from $700-$1000 per month on 30 year $300,000 home mortgage loan.

It is clear that higher credit score can get you a cheaper loan. How does one improve the credit score.

The first & foremost the root basics for improving credit score depend on your income:

Find ways to improve income
Improve your skills, investment in improving skills pays off.
Improve efficiency in whatever you do to increase your earnings
Making conscious efforts to save money with better budgeting.

Only when you have built a frame of mind & a plan to improve your earnings & saving money, these tips may help…

Payment History Tips

Pay your bills on time. Avoid delinquent payments and collections can have a major negative impact on your FICO credit score.
Do not miss payment dates, get current and stay current.
A longer history of paying your bills on time will improve your credit score.
Paying off a collection account will not remove it from your credit report.
It will stay on your report for seven years.

Amounts Owed Tips

Keep balances low on credit cards & other “revolving credit”.
High outstanding debt to income ratio can lower credit score.
Pay off debt rather than moving it around.
The most effective way to improve your credit score in this area is by paying down your revolving credit.

Don’t open a number of new credit cards that you don’t need, just to increase your available credit.This may actually lower your credit score.

Length of Credit History Tips

If you have been managing credit for a short time, don’t open many accounts too fast.
New accounts will have lower average account age, it can lower on your score.

New Credit Tips
Opening new accounts responsibly and paying them off on time will raise your credit score in the long term.

It’s right to request & check your own credit report. This will not affect your score, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers.

Types of Credit Use Tips

Apply for and open new credit accounts only as needed.
Don’t open accounts just to have a better credit mix - it probably won’t raise your credit score. Instead concentrate on improving your income first.
Have credit cards - but manage them responsibly.
In general, having credit cards and installment loans (and paying timely payments) will raise your credit score. Remember, someone with no credit card history can be placed in higher risk than someone who has managed credit cards responsibly.

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