Your Credit Score

We frequently hear from clients asking how they can increase their credit score.  Here are some basics regarding how a credit score is calculated:

1.  Timing of payments.  This accounts for 35% of your credit score, more than any other portion.  Making late payments on your mortgage, automobile loan, or credit cards will adversely affect your credit score.  Conversely, making consistent, ontime payments is the fastest way to increase your credit score.

2.  Credit utilization.  The ratio of your current debts to your available credit accounts for 30% of your credit score.  If you need to increase your credit score, start paying off some of your debts.  This will lower your utilization ratio plus you'll be making systematic payments (see #1, above).  However, be careful about closing existing accounts as this could hurt your credit score.

3.  Credit History.  15% of your credit score is based on the length of your credit history.  Assuming you pay your bills on time, a long credit history has a positive affect on your credit score.

4.  Types of Credit.  The use of different types of credit (installment loans, revolving credit, and consumer finance), may benefit your credit score.  About 10% of your credit score is based on this.

5.  Credit Searches and New Credit.  Recent searches about your credit score or new credit accounts can hurt your credit score.  Up to 10% of your credit score is based on searches and new accounts.  If you're applying for a mortgage or automobile loan, be careful about opening a new account, even if it's going to save you money at the cash register.  However, if you apply to more than one mortgage company, this is not supposed to work negatively on your credit score.

FICO credit scores were developed by the Fair Isaac Corporation in 1956.  They do not include salary, employment history, rental agreements, child support, or other such obligations in their calculations.

The highest possible FICO score is 850; the lowest is 300.  A score over 720 is considered excellent.  If your score is below 584, many lenders will question whether or not they want to do business with you.

There are three companies that report credit scores to lenders: Equifax, Experion, and Transunion.  Your score may vary slightly from company to company since they collect information from different sources.

As a consumer, you are allowed to get one free credit report each year from each of the three companies.  Be aware, however, that there are many companies that offer a free report but require you to sign up for a monthly reporting service.  If you only want the free credit report, go to  You may wish to obtain the report from only one company and, four months later, obtain the report from another.  This is like getting three credit reports free each year.

If you do not have Internet access, you can call (877) 322-8228 to request a free report.  This is an automated telephone system and the option to speak to a live person is not available.  Reports requested by telephone are sent by regular mail in about 15 days.