How can you improve your credit score?

2. Payment history: This accounts for approximately 35% of your score and one of the most important factors. The more recent the credit the more important it would be to have paid it on time. Although it’s important to pay everything on time banks tend to look at your mortgage history first. If you have a high credit score, but have been late on a mortgage, you may end up paying a higher interest rate.

1. Debt levels: This accounts for approximately 30% of your score. Keeping balances low on credit cards and other revolving accounts is the key here. Using your credit cards for small purchases like a tank of gas and paying them off at that end of the month will have the most positive effect on your credit scores. Take into consideration, that even if you pay off your credit cards each month, your credit report will still show the balances as of your last statements. For example, if you have a $1000 credit limit, and you use $950 it will effect your credit negatively.

   Length of credit history: This accounts for approximately 15% of your credit score. In general, a longer credit history will increase your score. However, even people with short credit histories may get high scores, depending on how the rest of their credit report looks.

   Are you taking on more credit: About 10% of your score is based on the pattern of your credit use. Be careful applying for credit. Each time someone pulls your credit it shows as an inquiry on your credit report. A few inquiries shouldn’t have a negative effect on your scores. Although multiple inquiries over a short period of time seem to effect credit scores negatively. Personal inquiries you make to the credit bureaus do not have a negative effect on your scores. These are considered consumer initiated inquiries as opposed to you seeking new credit.

   Types of credit in use: This accounts for approximately 10% of your score. This area takes into consideration both the types of accounts, their mix, and the total number of accounts you have in your name. It is not recommended that you open new accounts just to diversify your credit profile. For example….If you have a car payment and two credit cards…..It’s not recommended that you take out a personal loan just for the sake of diversifying your credit profile.