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Two Ways To Improve Your Credit Score

"The FICO score, invented in 1988, has in a very short time
become the single most important indicator used by lenders
to predict whether you will repay your debt." The New York Times

I joined MyFico several months ago to see how much my credit score had improved. MyFico is a service offered by Fair Isaac Corporation who invented the Fico credit scoring system.

Why Improve Your Score?

Your Fico Score effects every major purchase you will ever make because the interest rates you pay are directly related to your Fico Score. The average score in the United States is 710, but it can be as high as 850 or as low as 500.

Here is an example that was on MyFico: 

The higher your FICO® scores, you the less you pay to buy on credit – no matter whether you’re getting a home loan, cell phone, a car loan, or signing up for credit cards.

For example, see how your credit score affects you when you apply for a $216,000 30  fixed-rate mortgage:


 FICO® Score

Interest Rate 

Monthly payment
Actual National Interest Rates - Updated Daily

760 - 850

6.07% $1,305
700 - 759 6.29% $1,336
680 - 699 6.47% $1,361
660 - 679 6.68% $1,391
640 - 659 7.11% $1,453
620 - 639 7.66% $1,534

As you can see in the example above using today’s national rates, a person with FICO scores of 760 or better will pay $267 less per month for a $216,000 30-year, fixed-rate mortgage than a person with FICO scores below 640 – THAT’S A SAVINGS OF NEARLY $3,204 A YEAR. You can see that it pays – literally – to improve your FICO scores.

The Two Best Ways To Improve Your Score

According to the information I found when I logged in to MyFico the two best ways to improve my score were to:

#1 Make all of your payments on time. This so crucial because most credit cards now charge a late fee of $29 - $45 in addition to causing harm to your credit score. When you add up the cost of damaging your credit score plus the high late fees, paying your bills on time has to be a Top Priority!

#2 Systematically pay down your credit card debt over the next 24 months until you are only using about 10% of your available credit on a monthly basis. If you are in serious credit card debt, you may want to read my article on how I got myself out of credit card debt.

Once you get your credit cards under control and improve your Fico score, you will find that dealing with your finances is a much more pleasant experience. When you find yourself short on cash, make sure you first look to cut expenses before you "put it on plastic"! I always would rationalize it by saying "my business will get better and then I'll pay it off". Unfortunately, it's usually optimistic thinkers like me that end up in over our heads!