1. How much do you spend using your credit cards?

The higher your balances on your credit cards are as in relationship to your available credit limit, termed “Proportion of balance to high credit limit”, the lower your credit score will be. The credit score calculation allows for 35% of your credit score to be based on your revolving credit accounts, with how you pay being second. Credit experts say, keep your balances between 20 and 30%, the acceptable range. When you exceed 30% of your credit limit you will begin to lose more and more credit score points. If you are one of those who pay off your balances every month, keep in mind may not reflect the credit report because the creditors do not report uniformly to all 3 credit reporting bureaus.

To maximize your credit score don’t use the credit card for 30 to 60 days before applying for a loan, unless you know the reporting and closing dates on your credit accounts. If you do not know the cycles, an account can be paid off or down and using a credit scoring tool, “Rapid Rescore”, one can correct the credit card account to reflect the new balance and the credit score will adjust accordingly.

2. How do you pay your revolving credit cards?

Paying any loan or credit card late is the second most influencing factor to your credit score. When you’re 30 days past due, meaning your balance is still unpaid, your credit score will decrease anywhere between 30 and 60 points. Late payments from your past will have less and less of a negative effect on your credit score as you rebuild a consistent positive payment history with the creditor.

Setting up automatic online bill payments so you’ll never be late will help to avoid forgetting to pay an account on time. If you are late one month, be sure to pay off any past due amounts and become current so as to avoid “rolling 30 day lates.” This happens when consumers pay between cycles not knowing that they are still paying late every month.

3. How do you manage the number of credit accounts?

When it comes to your credit report and credit score calculation your credit score won’t be as high as it could be if you have just one credit account. Even if you pay on time and in full every month.
Why? Your creditors and lenders ideally like to see a potential borrower responsibly managing a mix of revolving debt (such as credit cards, where you can reuse the credit after paying it back) and installment debt (such as a car loan or most mortgages, where you pay the same amount every month for a certain period). The perfect mix is 3 to 5 accounts managed wisely, paid on time with revolving credit cards balances within the accepted range.

4. How do you manage the length of your history?

Older credit accounts count more than young ones in your credit score. The older the account the more it is a reliable indicator of creditworthiness verses a new account a few months of history that goes unrated.

Accounts open less than six months will reduce your credit score because the inquiry used to determine approval and interst rate was a deduction and the account is unrated for it payment history, but if you use it will be rated for it’s proportion of balance to the high credit limit. This is a catch 21, but a necessary evil in building a solid credit score.

While it may sound like a good idea to close out a credit card account when you transfer the balance to a lower-rate card, it is not, this practice will affect your score in a negative way, because your total balance stays the same but your credit limit goes down when you close an account. And, if you close an older account you have lost that long history with the creditor that is so important.

5. How do you check your credit report?

There are errors in your credit report, that you can be sure of. Studies by the credit bureaus themselves show that there is a greater than 50% of credit reports has information that belongs to someone else and as high as 70% that the information is unverifiable. You may have someone else’s accounts amd delinquencies reporting on your credit report.

Knowing what is on your credit report gives you the opportunity to improve your score, by correcting the mis-information. Order a free credit report once a year from each of the three major credit bureaus and make sure they’re accurate. If you can’t do it yourself, consider hiring a professional firm to help you though this complex, yet seemingly simple, as the credit reporting bureaus purport, process of investigation and correction. Be prepared for opposition, as it is not in the best interest of the bureaus for you to have a good credit score.

Two annoying but true facts: Credit scores aren’t free, and the credit bureaus don’t share information on you, so your credit reports and the scores based on them will vary. So if you’re planning on applying for a mortgage or other loan, “know before you go.” Contact Experian (experian.com), Equifax (equifax.com) and Trans Union (transunion.com) and order you credit reports individually or visit www.annualcreditreport.com and get your reports from all 3 credit bureaus in one stop. Reports are free once a year though credit scores are not.

Talk to a credit professional and review your credit report with us, it is free. And remember, a credit score is not something that you buy, it doesn’t come in a can or a box or at any store or website.
A positive up to date credit report and credit score is something that you create.