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Credit report scoring - improve yours!
Credit reports contain score information that can be improved
One of life’s great mysteries is the list of methods that the three primary credit agencies (Experian, Equifax, and Trans Union) use to develop credit scores. Each of the companies have their own secret statistical formulae that they use to determine your credit score, but none of these companies will divulge exactly what means are used to determine your credit report score.
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Credit report scoring tips
The exact methods these companies use are a secret, but there are some things that the average consumer can do to improve the score on their credit report:
If you have a home equity line of credit, pay off the balance. Lines of credit allow you to borrow against the loan principal more than once, and they are considered by lenders to be revolving credit, as a credit card would be. If you cannot pay it off, you should pay it down as much as you can. Either one should improve the score on your credit report.
- Check your credit report once or twice a year. You are entitled to a free copy from each of the three major bureaus, and you should take advantage of it. You may find information at the Website of the Federal Trade Commission. A careful examination of your report will show loans that you have had previously, such as student loans or auto loans. If you have paid these loans in full, be sure that these loans are shown as paid. You should also check the credit limits on your credit cards; prospective lenders look at the amount of available credit and compare it to your balance. If your limits are reported as too low, it may appear that your ratio of debt to credit is too high, jeopardizing your score.
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- While checking your report, beware of duplicate entries. It is quite common for mortgage companies to sell mortgages. Sometimes a mortgage gets listed twice under two different mortgage companies, resulting in a penalty on your score. The last thing you want is to be shown as having two mortgages, which could tremendously jeopardize your ability to borrow money in the future.
- Make sure that you keep your balances on all credit cards as low as possible. You do not wish to appear to owe money to too many different companies at once, as it may cause you to appear to be a compulsive spender.
- Try not to have any more credit cards than is absolutely necessary. You gain nothing in your credit score by having ten different Visa cards. Cancel unwanted cards, but be careful to cancel recent ones, rather than older ones. Older accounts represent “established credit”, which affects your score more favorably than newer accounts. Lenders like to see some payment history and not just a listing of new accounts.
Keeping track of your accounts and keeping your balances low will help you maintain the highest possible score.. The trick is to pay your bills on time and in full, if possible, while maintaining as few credit accounts as is necessary. By following these tips, you should be able to maintain a healthy score.
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