I've talked to a lot of people lately that have credit issues and wonder how to fix their FICO score.  I mentioned this to a friend of mine over at GMAC Mortgage and she said she had a great article on this topic.  I emailed this out to everyone that I have in my database and also thought I would put it in my blog for those not yet in my database.  If you would like to get newsletters and emails from me on the market please email me at michael@lofhy.com and I will put you on the list (you can unsubscribe at any time).

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Years ago your credit score was a big secret, known
only to a select few such as your mortgage and credit card companies. In 2000,
Fair, Isaac Co., the major supplier of credit scoring software, announced
they would begin sharing credit scores, also known as FICO scores, with
consumers.

What is a credit score? A credit score is a tool
used by credit grantors to determine your ability to repay your debts. The
information in your credit report is compared and evaluated against tens of
millions of other consumer credit reports which gives you a credit score or
number ranging from 350 (highest credit risk) up to 800 (lowest credit risk).
A higher score means you are less likely to make late payments or default on
the credit extended to you. Your credit score will change as the information
in your credit report changes over time.

Here is overview of the categories that determine your
credit score and some guidelines for scoring higher.

Payment History (35 percent)

Paying your current bills on time is the single most
important factor in obtaining a high credit score. This category includes
credit cards, retail accounts, installment loans such as those for a car,
loans from finance companies, and mortgages. Also included in this category
are matters of public record such as bankruptcies, liens, wage garnishments,
and collection accounts. The key to a higher score: Pay your bills on time!

How Much Debt You Carry (30
percent)

This category considers the amount of debt you owe
on your various credit accounts. If you've "maxed out" your
available credit, this could indicate that you are overextended financially
and won't be able to make your payments on time or repay your debts
completely. This category also examines how many of your accounts carry
balances and how much money you've already repaid. Closing accounts with a
zero balance does not generally improve your score in this area. The key to a
higher score: Keep your balances low.

Length of Established Credit (15
percent)

The longer you've had credit accounts the higher you
will score in this area. The age of your oldest account and the average age
of all your accounts are used in determining your score. Old accounts that
have gone unused are also considered. The key to a higher score: Establish
good credit and keep accounts active.

Applications for New Credit (10
percent)

Opening multiple credit accounts within a short
period of time represents a greater risk of becoming overextended. Each time
you apply for credit an inquiry is made into your credit history and these
inquiries show up in your credit report. A high number of credit inquiries
will lower your score.

Some inquiries are not considered in your score like
requests by you for your credit report, inquiries from companies for
pre-approved offers or companies that already do business with you, and
inquiries from potential employers. Some requests are treated as a single
inquiry especially when you are shopping for the best loan rate. The key to a
higher score: Only apply for and open new credit accounts when you need them.

Your Credit Mix (10 percent)

This category examines the types of credit accounts
you have and how many of each. Can a person have too many accounts? Yes and
no. It really depends on whether you have an established credit history or no
credit history at all. The key to a higher score: Open credit accounts only
if you intend to use them.

Your credit score will change for better or worse
depending on how well you understand and use these five keys to your
advantage in planning your financial future.

By: James H. Dimmitt, www.allthingsfrugal.com