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Improving your Credit Score

The higher your credit score is, the more likely you are to be approved for credit cards, loans, and mortgages. Your credit score enables you to borrow money, and potentially get yourself in trouble with credit, and as you score is higher your cost of borrowing money is lower.

Your credit score, or your FICO score as its called, is calculated based on a number of factors regarding your use of credit. Typically, credit cards, major loans, mortgages, auto loans, and collection agency accounts are reported on your credit report. Your past due electric bill or phone bill or unpaid cable bill is not likely to be reported to your credit report unless it gets sent to a collection agency. Any credit card or loan of any kind is likely to be reported, whether it's in good standing or past due.

These factors will improve your credit score:

  • All accounts on report showing in good standing, "pays as agreed"
  • Use of variety of forms of credit (auto loans, credit cards, installment accounts, mortgage, etc.)
  • High credit ratio on credit cards (for instance, 10,000 in available credit against 550 balance carried is a 5.5 percent ratio, which is better than having 25,000 in available credit and carrying 15,000 in balances, a ratio of 60 percent.)
  • Average age of accounts high, the older and more established your accounts are, the more stable your credit history.
  • Loans and credit cards with major banks. An auto loan with major bank or manufacturers finance company looks better than one from a finance company. Credit cards with major banks are better accounts also.
  • Overall number of accounts -- 6 to 10 accounts total is a generally good number.
  • Few recent inquiries on credit report -- these are the inquiries reported when you apply for credit.


  • These factors will lower your credit score:

  • Late payments and defaulted accounts. Falling 60-90 days past due on several credit cards can lower your credit score by 300 points in three months.
  • Too many accounts, and too many recently opened. You may think the more accounts the better, this is not true. A number of recently opened accounts lowers credit score.
  • Credit cards close to or entirely maxed out. Maxing out credit cards can lower your score by more than 100 points, and paying off 90% or more of your credit card balances can raise your credit score by more than 100 points.
  • Credit promotions -- takikng those "12 months same as cash" credit promotions at retails stores, even if you pay them off before the 12 months, can lower your credit score.
  • Accounts with finance companies and other questionable credit providers. Those pre-approved cards that only let you shop from their catalog with 5000 to 10000 credit lines are the worst kinds of accounts to accept. They claim they will build credit, they do just the opposite.
  • High number of inquiries -- you've applied for credit several times recently. Desperately seeking credit often will lower your credit score. Inquiries remain on the reports for two years.


  • A great credit report with high credit score will look like this.

    How to improve your credit score

    Whenever possible, pay all bills on time. The longer you go paying bills on time, and past due payments showing on your report scroll further back in time before scrolling off, the higher your credit score will rise. Pay down your credit cards and carry as little balance as possible. But don't allow credit careds you wish to keeop, to go inactive from non use, the credit grantor may cancel your account for non use. Closing credit card accounts is not a good idea if they are older established accounts that help your credit score and credit ratio. For instnace, if you have four credit cards each with 5000 credit lines on them and carry a total balance of 4400 among the four accounts, closing out two of them will double your credit ratio, costing you as many as 50-80 or more credit score points.

    Credit Report Disputes

    You have a right to view your credit reports at least once per year for free. You can visit www.annualcreditreport.com and obtain your reports for FREE from Experian, Equifact, and Transunion credit bureaus. Any information on those reports you believe is inaccurate you can dispute. If the creditors reporting that information fail to respond to the investigation, the credit bureaus will drop those accounts or information from the reports. Old accounts, especially negative or derogitory reports, are only allowed by law to be listed for 7 years after status date. Any accounts nearling that age should be disputed to get them reported immediately at 7 years.



    Fitch: Financial disaster may be ahead despite affirming US AAA credit rating    July 14, 2013



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