What You Need To Consider To Raise Your Credit Score

October 14, 2009

Before you begin the process of repairing your credit, you need to understand how your score is determined by the “Big 3″ credit bureaus (Experian, Equifax, and TransUnion).

So just what exactly is your credit score? Your credit score is an number calculated using a specific formula that lenders will use to rank the risk you run them as a borrower.

It is the most important factor they consider when deciding whether or not they want to loan you money.

Lenders make money off interest rates. They make money off people like you taking out loans and paying them back over a long period of time. So it makes sense for lenders to determine whether or not you will be able to keep your balance up over this period of time because if you can’t, you are no longer an investment. You become a liability, and they want nothing to do with you at that point.

Most people don’t know this, but your credit score is actually broken down into five categories, each with a different weight or importance in your overall score. The five categories are:

•    Payment History – 35%
•    Total Amounts Owed – 30%
•    Length of Credit History – 15%
•    New Credit – 10%
•    Type of Credit in Use – 10%

So as you can see, the majority of your credit score comes from your payment history and the total amount of money you owe in debt. In these two categories, it is late payments and high balances that are going to get you in the most amount of trouble.

Obviously this means that timely payments are VERY important.  All payments that are over 30 days late show up on your credit report at the three big credit bureaus and lenders will see this and make note of it. This could manifest itself in the form of you not being able to get credit when you need it most.

And if you think that these marks will note just go away on their own.  If you do have late payments (negative entries) then they will not come off unless they have already been on your report for 7 years (in some cases longer), or if you have successfully disputed them off your reports.

Since Total Amount Owed is also a huge factor in your score, if you can pay down your debts somehow, then you can quickly increase your score with that alone.

However, most people in this situation would not be in this situation if they had the money to pay off their debts to begin with.

Now that you know how your score is determined, you can begin laying out the framework for repairing your credit — fixing your credit so that you can get loans, credit cards, etc.

We’ll begin discussing this “framework” or gameplan next time.

Till then,

Amanda Layne

Category: Credit

8 thoughts on “What You Need To Consider To Raise Your Credit Score

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  2. Making payment is indeed a big part of your credit score. I would always go by , paying the minimum amount at all times. Because if you do so then you will not only be out of trouble but also be able to able to bring up your credit score.

  3. Nice post about What You Need To Consider To Raise Your Credit Score | Repair My Bad Credit Blog. I am very impressed with the time and effort you have put into writing this story. I will give you a link on my social media blog. All the best!

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