A credit score is a number between 300 and 850 assigned to you to help a lender gauge your credit-worthiness. Sounds simple, but behind this number is a mountain of statistical data that is fed into a system that tells lenders how likely you are to make good on your loan.
Important credit score factors
When a lender reviews your report, they will place massive focus on payment history and reliability. On-time payments are a predictor of your ability to maintain and manage this pattern. This goes beyond credit cards, and also includes bills like student loans, utilities, and car payments.
If you struggle to pay bills on-time, set up automatic payments or reminders to assist you in paying on time each month. Late or missed payments reflect negatively on your report for seven years, so it’s wise to use all tools available to you to prevent this from happening.
Short term credit score tips
The road to credit recovery will take time, but will be well worth the work. A low credit score may run you tens of thousands and cause some serious stress in its wake. Understand that you’re not alone, and there are many ways to rebuild. Here area a few of many key areas of focus:
- Pay bills on-time each and every month
- Reduce your total owed balance
- Avoid applying for unnecessary credit lines
Long term credit score tips
Lenders are looking for smart credit management over the long haul. Make an effort to keep up with bills and to maintain low account balances. The longer you do so, the better your credit score will be. Here are a few ways to achieve and maintain a high credit score:
- Leave unused accounts open, this will add to the total available credit, yielding a lower ratio
- Regularly check your credit report and clear up any inaccuracies immediately
- Utilize credit monitoring to be the first to know of identity theft or fraud
How long does it take to improve your credit score?
Unfortunately there is no quick fix when it comes to credit scores. Simply pay all bills on time, reduce your overall debt, and give it some time.
Delinquencies remain on your report for seven years, hard inquiries for two, while public records like bankruptcies or unpaid tax may remain for 10 or more.
Changes that affect credit scores
Actions that seem simple may negatively affect your score. For example, closing unused accounts will lower the total amount of accounts, but will also decrease the amount of available credit, resulting in a higher utilization rate which typically lowers scores.
Scores are based only on what is found on your report. This report provides an overall risk assessment based on past and present credit actions, providing you with information on what is working and what is not.
Credit reporting agencies
Credit reporting companies or bureaus compile data about borrowing and repayment history and sell this information as a credit report. This information is pulled from a variety of sources including lenders, public records and collections agencies. The most common names you’ll see are Equifax, Experian and TransUnion. All are in competition with each other and do not share information. It is common to see a slight difference in your report from each one.
Why don’t my credit reports match?
Lenders often report to different bureaus at different times, and do not generally report to more than one or two. If something seems off, it’s best to file a dispute with the credit bureau for resolution.
The Learning Center is an educational tool and the content is for information purposes only and is not intended to provide investment, legal, tax, or accounting advice, nor is it intended to indicate the availability or applicability of any R.I.A. Federal Credit Union product or service to your unique circumstances. All examples are hypothetical and for illustrative purposes. Although we have obtained content from sources deemed to be reliable, R.I.A. Federal Credit Union and its affiliates are not responsible for any content provided by unaffiliated third parties. You may wish to consult an appropriate advisor about your unique situation. The applicability of this information to your circumstances is not guaranteed. You should obtain personal advice from qualified professionals.