Consumer Credit Score Guide

credit score guide to improve your financial life

Your personal situation is different from someone else. The consumer credit score improvement service that works for someone may not be the best choice for someone else. You should take the time to understand all the consumer credit score options available to you to find the best solution for your needs and goals.

Why Is A Credit Score Important?

Credit scores are extremely important because they affect your ability to borrow money as well as the cost of doing so. Simply put, those with higher credit scores generally receive more favorable credit terms. This will translate into lower payments and less paid in interest over the life of any of your credit accounts. They also play a role in the car insurance premiums you pay. And, unfortunately, bad credit can even make it difficult to find a job or a place to live.

What Is A Credit Score?

Your credit score is your credit history expressed as a number. It is a three-digit number, typically between 300 and 850, designed to represent your credit risk, or the likelihood you will pay your bills on time. You can also think of it as a grade for how responsibly you have managed loans, lines of credit and other financial obligations over the years.

Credit scores are calculated using information in your credit reports, including your payment history, the amount of debt you have, and the length of your credit history. Higher scores mean you have demonstrated responsible credit behavior in the past, which may make potential lenders and creditors more confident when evaluating a request for credit, like a loan or a credit card.

What Is | What Affects

what is a credit score?

A credit score is a statistical summary of the information contained in a consumer’s credit report usually graded on a scale ranging from 300 to 850. Your credit score represents your financial reputation. It is used by lenders, landlords, employers and others to determine your level of credit risk, responsibility, and overall character.

Credit scores are calculated using information in your credit reports, including your payment history, the amount of debt you have, and the length of your credit history. Higher scores mean you have demonstrated responsible credit behavior in the past, which may make potential lenders and creditors more confident when evaluating a request for credit, like a loan or a credit card.

Here is a general look at credit score ranges:

  • Excellent – 800-850
  • Very good – 740-799
  • Good – 670-739
  • Fair – 580-669
  • Poor – 300-579

Credit scores may vary according to the scoring model used and which credit bureau furnishes the credit report used for the data. That is because not all creditors report to all three three nationwide credit bureaus (Equifax, Experian and TransUnion). Some may report to only two, one or none at all. Also, lenders may also use a blended credit score from the three major credit bureaus.

The types of credit scores used by lenders and creditors may vary based on their industry. For example, an auto lender might use a credit score that places more emphasis on your payment history when it comes to auto loans.

Since everyone’s financial and credit situation is different, lenders may also have different criteria when it comes to granting credit, for example, including your income as a factor.

FICO Score

Consumer Credit Report
Payment History
Amounts Owed
Length Of History
Credit Mix
New Credit

what affects credit score?

Credit scores are based on the information in our major credit reports. They represent a numerical weighting of different categories found in a credit report. There are two major providers of credit score reports in the US: FICO Score and VantageScore. While the credit scores may be calculated a bit differently, they will likely produce very similar results for you.

Your credit score is calculated only from the information in your credit report. However, lenders may look at many things when making a credit decision, such as your income, how long you have worked at your present job, and the kind of credit you are requesting.

If you have good marks in each of the following credit categories (using FICO Score as reference), your credit should be good no matter which credit score report is used. These percentages are based on the importance of the five categories for the general population. The importance of these categories may vary from one person to another.


Payment history is the most important part of any credit score. The first thing any lender wants to know is whether you have paid past credit accounts on time. This helps a lender figure out the amount of risk it will take on when extending credit.

Amounts owed (WEIGHT 30%)

Having credit accounts and owing money on them is the second most important category of a credit score. It is an indicator of whether your spending habits are sustainable and if you are likely to face serious financial problems in the future. If you are using a lot of your available credit, this may indicate that you are overextended-and banks can interpret this to mean that you are at a higher risk of defaulting.

length of credit history (WEIGHT 15%)

In general, a longer credit history will increase your credit report. The length of time using loans, credit cards and lines of credit is important in accurately forecastig a borrower’s future risk behavior. However, even people who haven’t been using credit long may have credit scores depending on how the rest of their credit report looks.

credit mix (WEIGHT 10%)

This category measures your mix of different types of credit accounts (credit cards, retail accounts, installment accounts, auto and mortgage loans) and how recently you have used them. The types of credit you have used shows how experienced a borrower you are. It is not necessary to have one of each.

new credit (WEIGHT 10%)

On a credit score, this category emphasizes your recent financial performance. This is one of the best predictors of your future financial activities. Research shows that opening several credit accounts in a short period of time represents a greater risk, particularly for people who do not have a long credit history. If you can avoid it, try not to open too many accounts too rapidly.

Guide To Improving Consumer Credit Score

Improving your consumer credit score is like losing weight. If your credit score is good to excellent, you will simply focus on mantenance of your financial behavior. Otherwise, to improve your credit score, you will need to make changes in your financial life. It is really that simple.

Similar to a crash weight diet, quick fix efforts to improve your credit score will likely not produce the results that you desire. It simply takes time to manage credit responsibly. If you have not done that in the past, you will need to repair your credit history before you see credit score improvements. The following guide will help you do that. This is based on improving the data the credit bureaus collect which is then used to calculate your credit score. Good credit data in, good credit score out, with time.

Credit Report | Credit Score

credit reports and credit scores

There are three major US credit bureaus: Experian, TransUnion and Equifax. The credit bureaus maintain records of your credit data and other identifying information. These are your consumer credit reports.

There are two major US credit score providers: FICOScore and VantageScore. FICOScore is the market leader and are used in over 90% of US lending decisions. These are your consumer credit scores.

When you get a new loan or credit card, make or miss a payment, apply for a car loan, etc., your lenders will report this information to the credit bureaus. Since it is up to your lenders what information they report to the credit bureaus, and which credit bureaus they report to, it is not uncommon for your credit reports to be slightly different at each bureau.

multiple Credit scores

And since your credit scores are calculated from the credit data on your credit reports, it is also common for your credit scores at each credit bureau to be slightly different.  Yes, you have multiple credit scores. And, different lenders use industry specific credit scores when evaluating your credit. For example, there are credit score versions for auto, home mortgage and credit cards.

Credit report information

All consumer credit reports contain the same four categories of information.

Personal Information – Your name, address, Social Security number, date of birth and employment information. This information is NOT used in calculating your credit score.

Accounts – Your credit accounts, organized by type (bankcard, auto loan, mortgage, etc.), date opened, credit limit or loan amount, account balance and payment history.

Inquiries – Requests for your credit report within the last two years. There are two types of inquiries:  hard inquiries and soft inquiries.   A hard inquiry occurs when a lender or other third party checks your credit report or score when you apply for credit with them.  A soft inquiry typically occurs when your credit reports and scores are pulled without you applying for credit (like when a credit card issuer sends you a pre-approved offer), or when you pull your own credit reports. Your credit scores only consider hard inquiries.

Negative Items – Delinquency information from missed payments that have been reported by lenders.  This also includes information on overdue debt from collections agencies, and public record information (bankruptcies and foreclosures).

payment history – 35% FICO SCORE

How you have paid your bills in the past, whether on time, late, or missed payments is an important factor in your credit score. The more severe, recent and frequent the late payment information, the greater the negative impact. Your credit score reflects payments history from:

Different Types Of Accounts

  • Credit Cards
  • Retail Accounts
  • Installment Loans (e.g., car loan)
  • Finance Company Accounts
  • Mortgage Loans

Public Records and Collection Items

  • Bankruptcies
  • Foreclosures
  • Suits
  • Wage Garnishment

Details On Late Or Missed Payments

  • How late were they?
  • How recently did they occur?
  • How many are there?
  • How much was owed?
Amount OF DEbt – 30% FICO SCORE

The amount of credit you are using and how much debt you owe is an important factor in your credit score. The total balance owed, how many accounts have balances and how much of your available credit you are using are some of the specific factors considered.

Total Amount Owed Across All Accounts – The sum of all your last credit account statements.

Amount Owed On Specific Account Types – This would be revolving or installment accounts, in addition to your overall amount owed.

Number Of Accounts With A Balance Due – Too many accounts with a balance could indicate a higher risk of over-extension.

Credit Utilization Ratio On Revolving Accounts – This indicates how much of your available credit you are using..  It is an important factor since if you are reaching your account limits, you might have trouble making payments in the future.

Remaining Amount Owed On Installment Loans –  Consistently paying down installment loans indicates that you are able to manage and repay debt.

Length Of History – 15% FICO SCORE

Your credit score takes into consideration how long your credit accounts have been established.

The Age Of Your Oldest Account

Your Average Age Account

The Age Of Specific Types Of Accounts – For example, credit cards, auto loans, mortgage, etc.


Things To Improve Your Credit Score

As mentioned, the process to improve your credit score is a combination of fixing your credit reports (if needed) of any disputable negative items and changing your financial behavior to better manage your credit and debt accounts. This process takes patience, discipline and time.  Here are specific areas that you should focus on:

  • Improving your credit accounts payment history.
  • Reducing the amount of debt that you owe.
  • Minimizing the opening of new credit accounts.

How Improve Credit Score

things to improve your consumer credit score

Here are the areas that you can focus on to improve your consumer credit score:

pay your bills on time.

Consistently making your credit payments on time is one of the biggest contributing factors to your credit scores. Set up payment reminders to avoid forgetting when credit payments are due.   If your bank or credit account provider offer a means to automate this process, consider this.  Avoid however simply making minimal payments to your credit accounts.

REDUCE the amount of your debt

When a company extends you credit, you increase the amount of debt that you need to pay back.  This is easier said than done, but reducing the amount that you owe is going to be a far more satisfying achievement than improving your credit score.

The first thing you need to do is stop using your credit cards.  Put them away.  If you find that you need to use your credit cards to survive the month, then you need to revisit your budget to see if it is realistic or whether you lack the discipline to adhere to it.

Use your credit report as a financial tool to make a list of all of your accounts.  Then go online or check recent statements to determine how much you owe on each account and what interest rate they are charging you.   Work out a payment plan (your financial budget again) that assigns most of your disposable debt payment budget for accounts with the highest interest rate first, while maintaining minimum payments on your other accounts.  An alternative strategy is to focus on paying off the smallest accounts initially.  This provides a physiological incentive of accomplishment.  You then repeat the process, selecting the next largest account.

If you find that that the financial planning and budgeting process is too complicated, you might investigate Credit Counseling.  They are generally non-profit and can provide analysis of your financial situation  and can help you create a financial budget.  Additionally the credit counselor can also propose a Debt Management Program to coordinate the process of paying your creditors.  Seeking assistance from a credit counseling service will not hurt your credit scores.

focus on improving payment history

Delinquent account payments, even if only a few days late, and collections can have a major negative impact on your credit scores.  If you have missed payments, get current and stay current.  The longer you pay your bills on time after being late, the more your credit scores should increase.   As your credit accounts age, older problem accounts carry less negative weight in your credit scores calculation.  Your new consistent account payments are, of course, positive for your credit reports.

If you have any credit accounts in collections, even once you have paid off the account, it will not be remove from your credit report for seven years.

Note that closing an account doesn’t make it go away.  A closed account will still show up on your credit report and may be considered by a score.

Place attention on accounts owed.

This category contributes 30% to your credit score’s calculation and can be easier to clean up than payment history.  It does however require financial discipline and planning.  Since this is measuring the amount of debt you have versus the amount of available credit, the lower your credit utilization ratio, the better for your credit reports.  Your primary focus here is how you manage the use of your credit cards.

  • Keep balances low on credit cards and other revolving credit.
  • Pay off debt rather than moving it around.
  • Don’t close unused credit cards as a short-term strategy to raise your scores.
  • Don’t open a number of new credit cards that you don’t need, just to increase your available credit.
Understand how Length of credit history affects credit scores.

While this category contributes only 15% to your credit score’s calculation, if you have a limited time using credit, it will affect you more than the general population.   You have limited credit information available for a lender to judge.  You should not open many new accounts quickly, since a new account will lower your average account age and you will appear to be a greater credit risk.  Your primary focus should be properly managing the use of your existing credit accounts.

new credit – 10% FICO SCORE

Your credit score takes into account several factors when considering your amount of new credit.   Opening several new credit accounts in a short period of time indicates greater credit risk.

The Number Of New Accounts – How many new accounts and what type.

Time Since You Last Opened A New Account

How Many Recent Requests For Credit – Credit requests will prompt inquiries, which remain on your credit report for two years.

Whether You Are Rate Shopping – Multiple loan applications that commonly involve rate shopping (mortgage, car loan or student loan), are counted as a single inquiry, if they all fall under a typical shopping period.

credit Mix – 10% FICO SCORE

Your credit score considers the different types of credit accounts being used or reported, including credit cards, retail accounts, installment loans and mortgage loans. .   Credit mix will be more important if your credit report doesn’t have a lot of other information to base a credit decision.

Different Kinds Of Credit Accounts – Your overall credit picture when determining the impact of Credit Mix on your credit scores.


consumer credit repair process

By law, information reported about you to credit bureaus must be fair, accurate, relevant, substantiated and verifiable. Consumer Credit Repair involves fixing inaccurate, misleading, unverifiable, untimely, biased or incomplete information listed on your credit report.

In order to fix these errors, the national credit reporting bureaus require you to work through a series of formal dispute letters and complicated online disputing systems. The importance of fixing errors on a credit report is that they will result in lowering your credit score.

Basically, third-party credit repair services will examine your credit reports and help you with disputing items that are unfair, inaccurate, and unverified in order to help you have a fair and accurate credit report.

There are four basic steps to improving the quality of your credit report and resulting credit score:

1 – Credit report analysis

Obtain your credit report from the three major credit bureaus to collect information on your full credit history. Each credit bureau’s report is different and all need to go through analysis. You focus on the negative items that are affecting your credit score and you create a disputing plan.

2 – Credit disputing

If you choose to use a third-party credit repair service, their legal team assigned to your case reviews your negative items and drafts and sends the appropriate dispute correspondence to the creditors or credit bureaus. The disputes need to be done in writing and sent to the credit bureaus via certified mail for bureau accountability.

3 – Dispute escalating

If a negative item requires more care to remove, the dispute is escalated to include legal representation (if you use a third-party credit repair service). The Fair Credit Reporting Act and other laws are used to ensure your credit rights are accurately represented.

4  Credit score analysis

As disputes are processed, the credit bureaus need to be tracked to ensure compliance with the dispute resolutions.

Thoughts On Improving Your Credit Score

Improving your credit score is more about fixing errors in your credit history (if they exist) and then following the guidelines above to maintain consistent, good credit history.  Raising your scores after a poor mark on your credit report or building credit for the first time will take patience, discipline and time.

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