The Nuts and Bolts of the Credit Score
As you look to improve your credit score, there are several "chunks" that you'll want to address. Some chunks are more critical than others. We'll rate each piece of the credit score improvement toolbox on a scale of one-to-ten, with ten being "prime importance," five being "average importance" and one being "low importance." However, depending on a variety of factors, the importance of any particular "chunk" of credit score improvement could go up. For example, if you have seventy-five credit inquiries, even though each one is a pretty low-impact chunk of credit improvement, the sheer number of them begin to overshadow even the more important pieces like credit history. In short, our rating system is informative, but not conclusive.
Bad Credit Listings
Level of Importance: 10 out of 10
The biggest score-killer is definitely the presence of negative credit listings. These may include public records, collection accounts, charge-offs and late payments. The bulk of the credit score depends on credit history.
Amount of Revolving Credit Used
Level of Importance 8 out of 10
This piece rates the amount of your available credit that's tapped. In other words, how loaded up are your cards and credit lines? Basically, this part of your credit score adds up the total of all the revolving credit you have used, and then divides that by the sum of your available revolving lines of credit. This provides what credit experts term a credit "utilization ratio" that gives the scorer an idea of how extended your credit is. The more maxed out your credit looks, the more likely the banks believe you are to default on your debts (and the lower your credit score will go). This is an area where it's particularly valuable to get a good credit coach. Grooming your credit score by adjusting your balances is a fast and easy way to push your score up -- if you know what you're doing.
Age of Credit
Level of Importance: 7 out of 10
If your credit is very recent, say less than three years, then your credit inexperience will drive down your score. This is measured by the age of your oldest account...
Credit Revolution: Path of the Smart Consumer 2007 John C. Heath, Esq., Dr. Randy Padawer, Jayson R. Orvis. All Rights Reserved. Published by Far Cliffs Multimedia, LLC