How to Improve Your Credit Scores

The credit reporting agencies Equifax, TransUnion and Experian do not release exactly what goes into their credit scoring criteria so we do not know everything. We do know that having a mix of credit helps. This means having both Installment Loans (like a car loan) and Revolving Loans (like a credit card) helps. You will have a higher credit score by having both types of loans reporting on your credit. The longer you have had a loan on your credit the higher the score will be, meaning someone with a 5 year history on a credit card would receive a higher score than someone who just opened one. We have seen that it typically takes about 6 months of having a newly established account with a good payment history before you will see an increase in your scores. Having a low balance on revolving debt (not maxed out) helps increase your scores, so if you have credit cards than try to keep the balance less than 30% of the credit limit. Keeping accounts open helps, the old rule seemed to be to close out anything that you are not using, but we have seen that closing out an account (especially one you have had for a very long time) will hurt your credit scores. Using your credit helps increase scores, meaning that you must have activity on your credit and use your credit (use it gently, but use it). We have seen that you need to use your revolving lines of credit once every six months for that account to figure into the score calculation. Next is how you pay your credit, obviously paying bills on time is much better than allowing your payment to go 30 or more days past due. If you have a current past due amount on any credit line then your scores are being severely decreased. Also avoiding any collections will improve your credit scores. Even Medical collections hurt as the credit agencies only see those as collections, not as medical collections like underwriters do. Finally, minimize the number of credit inquiries. You are allowed to shop around, but having numerous credit inquiries will bring down your credit scores. This is not an exact science and this is suggested as a guide from what we have seen and been told that helps improve credit scores.