Improving Credit Scores

So have you ever wondered what the make up of credit scores consisted of? How are different factors calculated when figuring credit scores? Is there really a method to the credit scoring madness? How is it that a person with a bankruptcy only 1 year ago can have a 680 credit score, yet someone who pays there bills on time and has never been late only has a 580 credit score? These are all actual questions that I have been asked over the years and I will try to explain what factors are weighed in when the credit bureaus determine a credit score.

There are 5 main categories for determining credit score. Today we will discuss the top two. First, 35% of your credit score is determined by credit history. This is simple enough to understand. Make your payments on time and you will have a good credit history. However, notice this is only 35% of your credit score. Therefore, while this is the main factor for determining your credit score, it is definitely not the only factor.

The second main factor for determining a credit scores is credit utilization. What this means is you need to monitor how much available revolving credit you have in comparison to how much you have available. Revolving credit is basically credit card accounts and home equity line accounts (and the similar). Ideally, you want to keep your balance to limit ratio at 20% or below, and you definitely want to try to keep your limit ratio to below 50%. An example of this would be if you had 3 credit cards, all with $1,000 maximum credit limits, you would want to try and ideally never borrow more than $600 total between the three credit cards (this would keep you at 20% or below). You definitely would not want to borrow more than a total of $1,500 on these credit cards or it will start to negatively impact your credit score.

For more help on improving, repairing, correcting, or increasing your credit score please visit http://www.creditrepairxyz.com/. I will be posting more on the determining factors of your credit score in days to come.