How to Pump Up Your Credit Score

ONE prescription for avoiding another real estate bubble is that banks tighten up mortgage requirements. Now, a new Federal Reserve report indicates that lenders have indeed been doing just that . A majority of banks are less likely to offer loans to people with a FICO credit score of 620 and a 10 percent down payment than they were in 2006, according to the report. Lenders were also less likely to do so even for those with a score of 720. Such stricter standards have drawn the attention of Ben S. Bernanke, the chairman of the Federal Reserve, who last week told a bankers group that "current standards may be limiting or preventing lending to many creditworthy borrowers."

For those with lower credit scores, the math is stark: A borrower with a credit score of 720 can expect a rate of 3.70 percent on a 30-year, $300,000 fixed-rate mortgage, according to myfico.com, while someone with a score of 620 to 639 can expect a 5.07 percent rate - or an extra $242 per monthly payment. If you don't have good credit, you're not going to get that crazy low rate. But there were tactics that consumers could use to raise their scores.

 Some 18 percent of Americans now have scores of 800 to 850, while 15 percent are below 550, according to FICO data. Through good behavior you could raise your credit score by as much as 100 points in a year. Often lenders will review your scores from the three big credit agencies, and they use the middle number to evaluate you.  Start by obtaining your three credit reports (available free once a year at AnnualCreditReport.com and study them carefully for errors or omissions. According to FICO, the two biggest factors in your credit score are your payment history, which accounts for 35 percent of the score, and the amounts owed, accounting for 30 percent .  An effective way to raise your score is to reduce your balances on credit cards. However if an account is in collection, it is too late to improve your credit score by paying it off. Consumers may get more mileage by paying down active credit-card balances and other debts first. Though mistakes and bankruptcies may stay on your credit report for seven years, lenders will generally be more likely to overlook late payments that happened two or more years ago than more recent ones, "A late payment that occurs this month when you're applying for a mortgage is deadly."

Another way to bolster your credit is by asking creditors with whom you have a good track , record to report to a credit agency, Ms. Gaskin said. That could include a landlord or a utility. Improving your credit could take three to four months, or it could take as long as 18 months. It isn't an easy fix and  don’t expect it to happen overnight."