If you’re worried about your credit score, it turns out you are in very good company.
According to USA Today, 25.5% of Americans (about 43 million people) had FICO scores below 600 as of April of this year, which is an increase from previous years. In 2008, 24.1% of Americans had scores in that range.
Part of the problem is that more Americans are dealing with extenuating circumstances in this recession. As USA Today notes, “Consumers with sub-600 scores typically have serious blemishes on their credit records, such as foreclosure, bankruptcy or multiple payments that were delinquent by more than 90 days.” That’s a big problem given that millions of Americans are currently at risk of foreclosure and bankruptcy.
FICO credit scores range from 300 to 850. Generally anything in the 800-850 range is considered excellent and anything above 700 is considered good. However, when you hit below 620, you're in rough waters. Unfortunately, it can take several years to repair a credit card score that is so low, but it’s not impossible. The trick is to rely on the same methods that everyone should use to keep their credit score high.
1. Don’t Just Pay on Time, Pay Early
Perhaps the most important thing you should do is be diligent going forward about paying off your charges on time. In fact, it may be best to pay your bills before they’re due just to ensure that your lender does not report an upcoming fee as an outstanding debt. It may sound far fetched, but lenders have been known to do this and it could hurt your credit score even more.
2. Resist the Urge to Close Your Accounts
When your credit score plunges, your initial gut reaction might be to ditch most of your credit cards since they helped get you into this mess. But your best bet is to keep these accounts open as long as you can. As we’ve mentioned before, about 15% of your credit score is based on how long you’ve had your credit accounts open.