Tips on Fixing Your Credit Score

Among the factors that can cause a low credit score are increases in consumer debts (auto loans, credit cards, etc.). A higher debt-to-credit limit available is considered a higher risk and can result in a drop of about 20 points.

A few late payments on a credit card or other loan can lower your score by as much as 100 points if you have a fair score or 80 points for someone with a good score.

The good news is that the older the negative item, the less impact it will have on your credit score. A collection that is shown on your credit report as paid and closed five years ago will hurt much less than a collection that is five months old - even if it is paid and closed.

There is no quick fix to improve your credit history and score if you have had any late payments, collections, etc. The "credit repair" companies that advertise "wiping out" your "bad" credit history are not able to do anything different then what you can do on your own to correct any erroneous information. Only time will increase your credit score once your derogatory debts have been brought current and show accurately on your credit report.

Tips for Good Credit: 1) Review your credit report at least once a year to ensure your credit information is being reported accurately, 2) Change your behavior, meaning pay your bills on time even if it is only the minimum payment. Bills paid on time is the single most important factor in determining your credit score, 3) Pay down or pay off debts with high balances on credit cards and other revolving accounts (such as a home equity line of credit). If your debt balance is not less than 35% of your available credit, your credit score can be decreased substantially.

A long history of good payments on a car loan, a mortgage, or a credit card increases your credit score. Keep older credit card accounts open, even if they are not being used because the algorithm rewards a long, positive credit history. If there are some credit card accounts that will not be used, close the newest ones first, and leave enough credit accounts open to keep your credit used to available credit at the 35% or less ratio.

Limit the new credit applications being made, because too many new accounts can lower your score. The exception is shopping for a mortgage or a car loan, as multiple inquiries for the same purpose in a reasonable period of time are considered a single inquiry.

In addition: 1) if you do not have one, open a checking and a savings account and use them wisely, 2) do not co-sign for another person on a credit card or loan, and 3) if you can not pay your bills, contact the creditors or see a legitimate credit counselor.