4 steps towards better credit

Dear myFICO,

This year is all about improving my credit. I got my FICO® scores last week and they are all in the mid-600s. My FICO score report says my length of credit history isn't great and neither is my payment history. So now what? How do I get rid of these negative factors? I'm dedicated to working on my credit standing, but not sure where to start.

Washington D.C.

Dear Tom,

By getting your current credit picture, you've taken the first step towards your goal of improving your credit this year. The next step is to make sense of your credit picture - which isn't as easy as sounds. It's like stepping on a scale and seeing your weight; you realize that you need to get in shape, but how you go about getting fit is the real challenge. It's the same with your credit; finding out how to improve your credit and continually manage it is the tough part.

Here are the 4 steps I always recommend for credit success:

  1. Start by getting your current credit picture.
  2. Educate yourself about credit and credit scores.
  3. Set a plan that focuses on fixing your specific credit problems.
  4. Keep tabs on your credit so you know if your plan is working.

Step 1 - get your current credit snapshot. If you were beginning a diet you wouldn't guess at your weight right? It's the same with credit; it's important to know your starting point. You already have your FICO; scores so mark this step as complete - you're a quarter of the way through this credit plan already!

Step 2 - get smart. Unless you are a dietitian, you probably wouldn't create a diet that you knew would guarantee success. So, unless you are a credit expert, don't go about trying to improve your credit blindly. Start by understanding the basic do's and don'ts of credit management. myFICO has a wealth of Credit Education that can help you become knowledgeable about managing your credit.

Step 3 - build your plan. After you've become knowledgeable, then you can really attack your credit problems. In your case, you already know what's in your score - and that your length of credit history and payment history are areas of your credit profile that need improvement. After doing some research on these factors, you know that your credit history looks at your oldest account, your newest account and the average age of your accounts. So, you may want to avoid opening a lot of new credit accounts. As for your payment history, you probably found out that this is one of the biggest components of your FICO score so you really need to focus on keeping current with all of your bills. Understanding how to deal with each credit problem starts with education and continues with a well conceived plan.

Step 4 - check your status. You'd be surprised to know how many people only check on their credit when making a major purchase. If there's a problem, finding out just before a purchase doesn't leave much time to fix the problem. You'd likely step on the scale every couple of days to see if your diet is working, right? Do the same with your credit, especially if you've created an improvement plan. We recommend checking your credit twice a year and at least 6 months before making a major purchase.

I hope this 4 step plan helps you get your credit into shape this year. Remember, there's no easy fix for building good credit - it takes a sensible approach that you can maintain for as long as you plan to use credit. From the entire myFICO team, we wish you credit success this year and for many years to come.

myFICO Team