Four Factors You Must Understand and Can Control to Change Your Credit Score

Your credit score is a snapshot of the contents of your credit report at the time the score was calculated. If your score is high (above 900), then you’re due some congratulations. Read on at your desire for some helpful hints to further improve your score. If your score is considered medium to low, then you should immediately read this article and begin to apply the useful hints.

Your credit score is essentially a translation of your credit report into a 3 digit score that enables lenders to evaluate your application for credit in a fast and more objective manner. Most people don’t realize that although they are entitled to receive their credit report, free of charge, annually from each of 3 reporting agencies (TransUnion, Equifax, etc), obtaining their credit score requires a payment to one of these services. The credit score is one of a few factors that a lender uses when deciding to extend credit, provide insurance or financial services. Understanding the contents of your credit report and your credit score, is critical if you are considering a major purchase where you will seek credit (or a loan) or even if you’re simply changing auto insurance companies.

Besides your credit score, other factors considered by lenders include: length of employment, income and previous experience with a customer. Depending on what you’re applying for, some lenders will consider the various factors differently, applying more weight to one than another.

In theory, if you have a high score, lenders should be able to conclude that you are capable of repaying your debts. This enables lenders to provide you with the best available loan terms, including interest rates. If you can understand the factors that determine your credit score, you should be able to improve upon those where you’re weakest and increase your overall score.


1)Amount paid on an open real estate account is too low – if the balance remaining on your home or auto loan is close to the value of the property, it may be considered a negative factor when determining creditworthiness. Lenders will look more favorably on a customer who has committed a large down payment to a home or auto.

2)Available credit on open revolving credit accounts is too low – having credit available is a sign that you are able to manage your finances responsibly. Lenders like customers that have large amounts of credit available.

3)Balances on your open accounts are too high in comparison to their credit limits – it is a good idea to use your accounts regularly, but remember to keep you balances low in comparison to your available credit limits. If you have 2 – 3 Visa, Mastercard and/or American Express cards and if you’re carrying a large balance on these credit card(s), it’s a signal that you may have borrowed too much and may be living above your means. This high ratio of balances to credit limits on open accounts indicates you don’t have much available credit. Seeking more credit may be viewed negatively by lenders.

4)Average credit amount on open real estate accounts is too low– having credit available to you is a sign that you are able to manage your finances responsibly. Lenders like to see that consumers have a large amount of credit available to them.

Improving your credit score

Regardless of whether your score is high or low, when you receive your credit report and score, there may be a lot of discussion and interpretation included. You should read the report thoroughly and identify what opportunities you can immediately take to improve your score. Most of the easy fixes (which I refer to as, “low hanging fruit”) may be disputing and correcting errors or simply closing a few older retail accounts that you haven’t used for a while and you don’t intend to use anymore. Consumer reporting agencies must correct or delete inaccurate, incomplete or unverifiable information.

For example, if you opened an account with Target 6 years ago in order to save 10% on a large purchase, you haven’t used the card since, you’ve paid off the purchase long ago and you have other older active accounts, it would be a good idea to close the account. You may also discover errors on your report such as an unpaid and overdue balance on an account with a doctor or local merchant. If an error exists which is negatively impacting your score, you have the right to dispute the error. If you believe your debt was paid on time and in full and/or at least paid in full, then you should approach the person/company that is reporting the issue with your account. You may request that they remove the documentation of a problem from your account.

Since your credit score is a snapshot of your credit report at the time it was calculated, long term responsible credit behavior is the most effective way to improve future scores. Following are the best ways to improve your score.

a)Pay bills on time – utility bills, credit cards, mortgage and auto loans are the obvious bills to pay. However, paying medical bills and insurance on time also impacts your credit score.

b)Lower balances on revolving credit cards – this assists factors 2 & 3 above. This increases your available credit on card.

c)Use credit wisely – paying bills on time and lowering balances is the first step. Limit applications for additional credit, unless, of course you’re seeking better terms to pay down balances on a high interest loan/credit card. Continually applying for new cards, in order to swap balances to lower interest cards, may appear to save you money, but it can be viewed as a negative by consumer reporting agencies.

d)Regularly review your credit report to ensure it is accurate

If you’re the type that has no idea where your turbulent credit history has left you in the eyes of the lender, then don’t worry, it’s easy to request and review your credit report. It costs a little money to receive a credit score with your report. However, it’s an exercise that’s well worth your time and the minimal expense. If you are in the market for a new home or auto, then most likely, you’ll seek a new loan. If you can confidently walk into an open house or new car dealer, knowing that you’ll have no problems getting the loan to complete the purchase, then you’ll likely get your choice of home or car that’s in your price range.

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