Credit Questions & Answers

What you need to know about your credit score.


The first thing to know about your credit score is how much it is integrated into so many parts of your life whether you were aware of this or not.  It isn’t just about buying a house or a car. Your credit score can determine your rates for insurance, whether you get a job and a lot more. This page will explain how your credit score is determined and most importantly how you can raise your score.

Firstly here is a chart that shows the five indicators of what makes up your credit score and how heavily each portion is weighed.

Understanding Your Credit Score

According to FICO, there are 5 factors that make up your credit score. They’re each weighted somewhat differently in terms of their effect on your total score. 

1) Payment History (35% of Total Score)

This is pretty obvious at first glance: your history of making payments on loans and credit cards plays a big role in determining your credit score. 

Keep in mind the size of the late payment and the length of time it has been overdue matters. A $55 credit card payment that is 90 days late will usually have a smaller impact on your score than a $500 auto loan payment that’s six months late.

Almost any type of late payment can affect your score. Cell phone bills, child support payments, medical bills… if you pay any of these late your score could pay the price. 

How to improve this section of your credit report:

Pay on time. Credit cards. Utility bills. Library dues. Parking tickets. No matter what it is, pay it on time. If there’s ever a time when you can’t pay a bill on time (or you forget), do the following:

If you ever get a phone call or a letter from a collections agency, respond immediately and — it’s impossible to emphasize this enough — attempt to negotiate a removal of the collection from your credit file on the condition that you pay the amount in full.

If you can only pay off certain past due amounts, be strategic about which ones to pay off first.  Focus on the ones you can fully pay (so they won’t damage your credit score any more than they already have).  Also focus on paying off the ones that have been overdue for the longest time.

2) Amounts Owed (30% of Total Score)
Many people don’t realize that what matters most here is not the total amount you owe but the proportion of your available credit that you are using.  For example, a balance of $5,000 on a credit card with a $20,000 credit limit (25% used) is better than a balance of $1,500 on a card with a $3,000 limit (50% used).

How to improve this section of your credit report:

Don’t take on loans or expenses that you can’t afford. And as much as possible, reduce the revolving amount on your credit cards (i.e. the balance that carries over from month to month). 

Only for the very disciplined: Call your credit card company and ask them to increase your credit limit OR apply for another credit card.  Increasing your total credit limit will decrease the proportion that you’re using.  But this will backfire if you don’t have the willpower to hold your spending steady.  So proceed with caution.

3) Length of Credit History (15% of Total Score)

This is pretty straightforward.  The longer your credit history, the better. 

How to improve this section of your credit report:

Start developing a credit history as soon as you’re responsible enough to do so.  Many people get their first credit card while in high school.  As long as you start off with a very low credit limit to prevent yourself from making any rash or foolish spending choices, this can be a good way to kick off your credit history.

Don’t close an account in good standing unless you have to. It turns out, that credit card you’ve had for 10 years might be your credit score’s best friend (if you’ve used it wisely). Why? Because it’s the most tangible proof that you’ve consistently paid on time. Once the account has been closed, you won’t benefit as much from it.

4) New Credit (10% of Total Score)

Opening new credit accounts or having your credit checked will hurt your credit score, at least temporarily. Above, we described certain scenarios where opening accounts can help you in the long term, but it will always hurt you a little in the short term. 

How to improve this section of your credit report:

Don’t apply for a whole bunch of credit cards at once. In fact, don’t apply for a whole bunch of credit cards at all. Use credit (and applications for credit) very strategically and very sparingly.

5) Types of Credit (10% of Total Score)

There are many types of credit — auto loans, mortgages, credit cards, retail accounts, etc. — and having several different types can sometimes help your credit. However, there is no need to take on many types of credit simply to help your credit score.

And finally – Check your credit report for free once a year via That site was mandated by the government to allow people to access their report. When you see your report, look over it carefully to make sure there are no errors on it. Occasionally, your credit can get dinged based on false or inaccurate information. By checking over the report yourself, you can make sure that doesn’t happen.

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