Your credit score is a three digit number ranging from 350 to 850. Roughly 50% of consumers have a score above 720. The higher your credit score is, the lower you can expect your interest rates and fees on loans to be.

Your credit report indicates to lenders how you have handled your credit in the last 24 months. Credit scores are recalculated every time a lender requests it. If you’re 30 days late with a payment and your creditor reports it, a score in the mid 700s can drop somewhere around 50-100 points or more!  It can happen overnight and literally take years to recover from. 

There are few hard and fast rules pertaining to how much you can bring your credit score up.  Generally speaking, a low score can be pulled up over time by doing the right things but it is a slow process. Your score might move up just 30 points in a year even if you are doing the right things.

Approximately 25% of credit reports contain at least one serious error and closer to 80% contain at least a minor error.  You should check your report at least once a year (preferably twice a year) for outdated data, paid-off loans listed as due, or money owed by someone with a similar name to yours. It can easily take up to six months or longer to get an error fixed.

  Five ways you can raise your credit scores:

1. Pay your bills on time. Payment history affects about 35% of your score. To ensure timely payments set up automatic payments online, keep stamps on hand, and maintain your budget.  I recommend setting up an automated bill paying system that will prevent you from missing a bill.

2. Keep credit balances at 30% of your credit limit or lower. Around 30% of you credit score is based on how much credit you have access to and how much you are using.

3. Do not cancel credit cards to raise your score. Roughly 10% of your score is based on how long you have had your accounts opened.  The longer the account has been opened, the more 'value' assigned to you by the credit scoring models.

4. Do not apply for too many credit cards. About 10% of your credit score is determined by the number of times lenders request your credit reports. Multiple requests could indicate to the credit reporting agencies that you are desperate for credit or that you have lost your job.

5. Be careful with the types of credit you use. About 10% of your score is based on the types of credit you are using. Secured loans such as car loans and mortgages are generally less risky because they are collateralized and unsecured loans such as student loans and credit cards are considered riskier in the eyes of credit companies.

 Pay attention to your credit and it will be there for you when you need it! 

Author: Randall Filbert, MPA 

 www.LendingIdaho.com  www.FamilyGuideToFinances.com www.BuyandSellinIdaho.com

This blog's intention is to provide inspirational stories as well as historical accounts and insight into matters concerning the mortgage and real estate markets. These are my opinions and should not be regarded as factual data.