One Quick Way to Improve Your Credit Score

There are many different factors which go into your credit score, also referred to as FICO score. Your FICO score is calculated depending on your credit report by a formula made by the Fair Isaac Corporation. However, FICO won't actually reveal its particular formula.




Though no one knows just how important each factor is at calculating the credit score, one known factor that plays a sizable role is your utilization rate.

Your utilization rate is basically "how much of your available credit have you been using?"

The theory is that if someone has credit lines of $10,000 and they're using $9,500 of that credit, they're a much bigger credit risk than someone who's only using $1,000. Therefore, their credit score would be lower.

However, there are a few things about the way FICO calculates your utilization rate that are a bit strange. One small loophole in particular can result in you being able to quickly boost your credit score without actually having to reduce your credit balances.

==> The Odd Thing about Credit Utilization

Instead of computing your average utilization rate, FICO prefers to measure your score according to your highest utilization rate.

For example, let's say you have two credit cards. Both of them have a $5,000 limit. One card is maxed out, while another card has a balance of zero.

In this case, your maximum utilization rate would be 100%. In this case, your credit score will be severely negatively impacted.

On the other hand, if you had distributed your credit balance half and half over the cards, your maximum utilization would be only 50% each.

Another example would be if you had one card with a $1,000 limit and another card with a $5,000 limit. If you had to charge $800, it's a much better idea to charge it to the $5,000 card.

==> A Few More Things to Know about Utilization Rate

The ideal utilization rate is 35% or under on all your cards. Having even one card above 35% will drag your max utilization up.

In an independent study of 70,000 different credit scores, researchers found that people with 720 or higher credit scores tended to have utilization rates of 20% or less.

Nonetheless, people who had a zero percent utilization rate frequently had really low credit scores. That's because their credit scores were so low, they could hardly even have a credit card.

The ideal is not to have a zero percent utilization rate. If you aren't using your credit cards at all, you are not showing creditworthiness. Keep in mind - creditors would like to know that you'll pay back loans you are taking out, not that you don't take out loans.

Therefore try to get your utilization rate between 1% and 35%. If you have a low balance on one card and a high balance on the other, try balancing your cards out to get your maximum utilization rate down. This technique can very quickly provide you with a credit boost, actually in just a couple of days.

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Bad Credit Card Report

Be Able to Identify Bad Credit Loan Scams

For those who have below average credit, there are people out to get you. Unscrupulous scammers are aware that people with bad credit often need to have loans and use the opportunity to extract both money and personal information.

How can these kinds of scams work and how can you avoid them? Let's take a look.

==> How a Bad Credit Loan Scam Works

The scammer first makes contact with you via email, phone or by using a website.

Often they have some sort of promise where they promise that you will be approved for a loan, no matter what your credit looks like. (That should be your first red flag - no real loan provider guarantees loans without seeing your credit.)

They're going to then ask for your personal information, including social security, address, birth dates and account numbers, in order to process your loan.

Lastly, they're going to usually request an "advance fee" which must be paid so as to process your loan.

Obviously, once the fee is paid, no real money is ever wired to your account. The fee is forfeit, but the scam does not end there.

Your personal information is often then sold to third parties, who in return use your information to write bad checks, open unauthorized credit card accounts or commit all kinds of other fraudulent activities.

In other words, falling for one of these scams will not only cost you money, but possibly result in a stolen identity.

==> How to Recognize and Avoid These Scams

The first step to spotting a scammer is to always, always, always investigate the lender before giving any personal information.

Use the Better Business Bureau's website to look up any business you're looking at. If you see any scam reports, stay away from it. Also look them up on RipoffReport.

Never pay upfront for a loan of any sort. That applies for personal loans, bad credit loans and payday loans. In the USA and in Canada, it's outlawed for lenders to ask for a fee upfront, so if they do you know you're dealing with a scammer.

Finally, only work with websites you trust and know. Never do business with a company you haven't heard of, especially if they reached out to you first via email. Real loan companies will never, ever send out unsolicited emails.

With just a bit of background information and a careful mentality, you can avoid being scammed. It's unfortunate that there are people out there preying on people just when they can least afford the financial hit, but such scams all too common.

You now know how these scammers work, as well as a few tell-tale signs that will permit you to spot these scams miles away.

Learn more What Is Credit Score here