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I Want To Improve Your Credit Score, But You Won't Let Me Help!

Guest post by: Charles Machado

Article Overview: Credit score ignorance is just as bad as accumulating too much debt or not paying your credit cards on time. If you don't understand how your credit report score is calculated then you can't improve your credit score. read this brief primer and learn -- How do they calculate your credit score and who are "They"?

I Want To Improve Your Credit Score, But You Won't Let Me Help!

Ignorance is never bliss when it comes to credit reports and credit scores. Many times I've wanted to help clients improve their credit scores but they stood unwilling to learn about credit. First, the basics.

They are the three credit reporting agencies:

• Transunion has a credit report called Empirica.
• Equifax has a credit report called Beacon Credit Score
• Transunion has a credit report called Fair Isaac

Each of these big three will offer a different credit score because each of them has different information about you. An example of this is a current real estate loan may only be reported to one or two of the credit reporting agencies. Maybe you defaulted on a cable TV account while you were in upstate New York and that cable company only reports to one of the credit reporting agencies. Now that you've moved to California, you do business with another cable company.

Normally, a lender will obtain all three credit reports and use the middle number. The highest credit score number a person can get is 900 and the lowest is 300. In all the years I've been involved in finance, I've only seen a handful of 800's and I've never seen a 300 credit score.

Here is the general breakdown and the normal considerations of each score range.

• 750+ Excellent
• 660-749 Good
• 620-659 Fair
• 350-619 Poor

Below is a brief explanation of how credit scores are obtained.

Approximately 35% is Payment History.

The most influential factor in calculating your credit score is the manner in which you pay your debt. Are you late paying credit cards or do you pay more than the minimum amount due? Do you let debt pile up? Do you wait till bills are due or do you pay credit card debt early?

Approximately 30% is Unpaid Debt.

The amount of debt you accumulate is the second most important consideration when calculating your credit report score. How much time has passed since debt has been charged off/ Lenders are most concerned with the past eighteen months. They also take into consideration the total amount of debt you owe. Add it up and figure the debt-to-credit-limit ratio.

Approximately 15% is Credit History.

Next in the credit score calculation is the length of time you've had credit history. More time means more stability in many cases, but don't just put that credit card away in the drawer. You have to use it and time since last activity is an important consideration.

Approximately 10% is Current Applications.

The types of recent credit activity is an important factor in deciding your credit report score. The worst types of credit are with jewelry stores and finance companies. These "last resort" loans may not be desperate attempts to get credit, but lenders view these accounts as unfavorable. How many inquiries falls into this category and how many are very recent may indicate financial problems.

Approximately 10% is Credit Matrix.

Last to influence credit scores is the mix of credit you have. Do you have too many credit cards? Is there at least one residential mortgage in the matrix? How much is "too much" credit? It's a difficult number to obtain, but there are ways to determine how to raise your credit scores with the help of computer simulators. We have one on our website.

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