How to determine your credit rating and steps to get a good credit score.

One of the keys to improving a credit score is to know what makes up your rating. After you know that, it will enable you to take steps to improve your rating. So the key is to understand the foundations.

What is a credit score? It is a summary of your credit history going back several years at minimum. Credit scores range from 300 to 850, with 300 being the worst and 850 the highest. A score is really a snapshot that gives banks and lenders an idea of whether or not you're a good credit risk and whether you should receive a loan. However the use of it has been evolving. As an example, it is being used today by businesses for everything such as determining your car insurance premiums and even whether you get that job you interviewed for.

There are five categories that determine a credit score, and they are:

  • Your payment history (35%)
  • Your level of debt (30%)
  • Length of credit history (15%)
  • Number and diversity of loans and credit accounts that are currently open (10%)
  • How many times your tried to get new credit (10%)

The key to getting the best credit score is to balance all five of these categories. The Foundation for Credit Counseling has this advice to get the highest credit ratings.

The most important step is to just pay your bills on time. This simple step is the biggest factor. If you pay late, that is the number one issue that leads to debt collectors, judgments against you, repossessions, lower credit ratings, and much more, all of which is negative.

Stay up to date on your credit scores and reports. This can easily be done. A free credit report is available at Be sure to check it for omissions or errors. If you find any mistakes or incorrect data, report it immediately.

Keep your outstanding debt low. Using just 10% of your credit limit is preferable and will lead to the best scores. If that is not possible, it should never be greater than 50%. There are different steps to take to reach these targets. You can either pay down debt, or increase your credit limits. Both of these will have the same effect.





Either way will lead to a lower debt percentage. Be mindful as well if your credit limits have been cut by the banks or credit card issuers, as that can make your account look maxed out and increase your percentage of unpaid debt.

Sign up for new credit wisely, and be prudent. You should not take the bait for every card offer you get in the mail, no matter how tempting, or do not sign up for the credit card that will give you a at the department store. So always think about the impact before borrowing more money. The more attempts you make to get credit for any type of bank or lender, and the more credit requests completed, the lower your credit score will be.

Do not needlessly close accounts. Part of your credit rating is determined by how long you've used a credit card and have you been able to manage the various accounts responsibly. Building trust over time is very important for consumers. Closing an account shortens that credit history and lowers your score.

Use different types of credit. For example, having a mortgage, car loan, credit cards, and a personal loan show you can manage several types at once and will lead to higher scores. A diverse history will account for about 10% of the overall score.




By Jon McNamara

“Related Links” are listed below.




Contact Us

About Us


Privacy policy