Improve your credit score - KWWL - Eastern Iowa Breaking News, Weather, Closings

Improve your credit score

Financial Tip of the Week from the Iowa Bankers Association:

A credit score is a number that helps lenders and others predict how likely you are to make your credit payments on time.  Each score is based on the information in your credit report.  The most commonly-used credit scoring system is the FICO┬« score, developed by Fair Isaac Corporation.  FICO scores range from 300-850, with most people scoring in the 600-700 range. FICO scores above 700 are very good and are generally a sign of financial health.  FICO scores below 600 indicate higher risk.

Why Your Credit Score is Important

Credit scores affect whether you can get credit and what you pay for credit cards, auto loans, mortgages and other kinds of credit. For most kinds of credit scores, higher scores mean you are more likely to be approved and pay a lower interest rate on new credit. Want to rent an apartment?  Without good scores, your apartment application may be turned down by the landlord.  Your scores also may determine how big a deposit you will have to pay for telephone, electricity or natural gas service.

Lenders look at your scores all the time.  They look at your scores when deciding whether to change your interest rate or credit limit on a credit card, or whether to send you an offer through the mail. Having good credit scores can save you money in lower interest rates. Consider the following example: 

A couple is buying their first house.  They want a 30-year mortgage and their FICO credit score is 720. They could qualify for a mortgage with an interest rate up to three percentage points lower than a couple with a FICO score of 580. On a $100,000 mortgage loan, that difference in interest rate accounts for as much as $2,400 a year, adding up to $72,000 over the loan's 30-year life. 

What You Can Do

Wondering  how you can take steps to improve your credit score? Here are a few steps to get you started:

  • 1. Realize that it takes time to improve your score. There is no quick fix to improve your credit score. According to Fair Isaac Corporation, the best way to improve your FICO score is to manage credit responsibly over time.
  • 2. Pay your bills on time. Late payments have a negative impact on your credit score.
  • 3. Pay down past due accounts. Any amounts that are past due destroy your credit score. Work at paying down past due balances as soon as possible.
  • 4. Keep balances low on credit cards. High outstanding debt can negatively affect your score. Make sure your credit card company reports your credit limit to the credit bureau and then keep your card balances at 50 percent of that limit or below.
  • 5. Don't close your credit cards. Closing credit cards won't necessarily improve your credit score. If you need to close some credit card accounts, the newest cards are the ones to close. People that have credit for a longer period of time are assumed to be at less risk of defaulting on payments. Use the old card at least once every six months to avoid it moving to inactive.
  • 6. Call to eliminate late payments from your credit report. Once you become current on any late payments, contact all creditors that have reported the late payments to the Credit Bureau and request they be removed. Persistence and politeness usually result in success on this one!
  • 7. Review the information in your credit report. Take time to verify the accuracy of the information in your credit reports from each of the nationwide credit reporting agencies: Equifax, Experian and TransUnion. Federal law allows consumers to view a free credit report from each agency every 12 months. To obtain your free credit reports, visit, the official site created by the credit reporting agencies to help consumers to obtain their free credit report in accordance with the Fair and Accurate Credit Transactions Act.

Information provided by the Iowa Bankers Association (IBA), representing banks and thrifts in the state. For more information go to or

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