Average FICO credit scores hit record highs — 5 things you should doNovember 20, 2020
The coronavirus pandemic has taken a toll on many Americans’ financial health but surprisingly, consumer credit scores are trending higher. The average FICO credit score is now 711 — up five points from the average score one year ago.
5 ways to increase your credit score
If you’ve seen your FICO scores climb, these tips can help you keep improving your credit.
- Consolidate debts
- Continue to pay bills on time
- Increase credit limits
- Don’t close credit cards
- Be selective in applying for new credit
1. Consolidate debts
While FICO scores are up, debt levels are on the decline. If you’re focused on paying off revolving debt, such as credit cards, that could help with improving your score.
With interest rates near historic lows, now could be an opportune time to consider getting a personal loan for debt consolidation.
If you want to gauge your potential savings on interest, you can visit Credible to compare rates from multiple lenders and use a loan calculator to estimate monthly loan payments.
9 OF THE BEST DEBT CONSOLIDATION COMPANIES
“Paying off multiple debts with a single, larger loan with a lower interest rate and perhaps longer repayment period can reduce the monthly payment amount,” said Rod Griffin, senior director consumer education and advocacy at Experian. “As a result, you may be better able to manage payments and ensure they’re on time, protecting your credit history.”
And the more your balances decline, the more you could improve your credit utilization ratio. This refers to the percentage of your available credit limits you’re using at any given time.
2. Continue to pay bills on time
FICO scores are composed of five factors:
- Payment history
- Credit Utilization
- Credit history length
- New credit
- Credit mix
The most important among these is payment history. A credit history that’s characterized by on-time payments could translate to a higher credit score.
If you have a strong history of paying off credit cards on time but are missing a good credit mix or new credit, consider opening up a new credit card. You can browse various types of credit cards using Credible’s free online tools. Get started with your card research today.
According to FICO, just 7.3% of Americans had a 90+ day past due missed payment over the last six months, which is almost a 1% decline from the pre-pandemic era. If you’ve been making payments on time already, then stick with that strategy.
If you think you might have difficulty making payments, talk to your lenders before you’re late, said Griffin. “They have tools and resources under the current circumstances that may help you stay on time or delay payments until you get through a rough financial stretch.”
HOW FICO’S NEW CREDIT SCORE CHANGES AFFECT YOU
3. Increase credit limits
After payment history, credit utilization is the second-most important factor affecting FICO scores. Paying down revolving debt can help improve your credit utilization ratio…