At myFICO.com we interact with thousands of people every month who have questions about credit scores, credit bureau reports, how lenders evaluate applications for credit, and lots more.
One question we hear often from people with challenging credit situations who score low in the 300-850 FICO score range is:
“…seriously, will my credit score ever increase?”
The answer is a resounding yes. But it requires that you set and stick to a focused plan of action to:
- Pay your credit obligations on time
- Reduce your debt exposure
- Avoid seeking any new credit in the near term
Raising your score also requires patience- a virtue that unfortunately is rare in our fast-paced and instant-gratification world.
Are you still a doubter? Think I’m pulling your leg?
I have facts to back me up. We recently studied the FICO Scores of a random sample of U.S. consumers at two points in time separated by 12 months. We wanted to understand how their scores changed over that 12 month time period. These people were selected at random, so they included some who monitor their credit score and many who don’t.
Here’s what we found:
- FICO scores increased for almost 40% of the consumers in the lowest part of the range (300-499), pushing them up into higher ranges.
- For consumers in the middle ranges (650-699 for example), close to 30% had their FICO score climb above 700 during that 12 month period.
- Even people with really high scores (750-799 for example) saw their score improve: 20% moved up to the top 800-850 range.
By improving scores from the middle ranges to high ranges you can potentially gain real dollar saving benefits. These include savings on interest rates, such as saving $2,000 on a 5 year/$20,000 new car loan, because lenders typically offer more attractive rates to applicants with higher scores.
At the end of the day, we each have the power to improve our credit standing and reap the financial benefits of having a high FICO score – even if you are now in the lowest score ranges. The key is just like dieting to lose weight — remain focused and stay persistent because it may take time.
Tom Quinn is the Vice President of Business Development for myFICO, and has over 20 years of experience working with consumers, regulators and lenders and regarding credit related questions and initiatives.