Clients often ask us what they can do to raise or maintain an excellent credit score. There are numerous factors that affect your credit score. Many people believe that all they have to do is review their credit report for errors, pay their bills on time, and let time pass. While this is important, we have found that there are 5 factors that primarily effect your credit score.

Payment History – About 35% of your credit score is determined by your payment history. Paying your bill on time, each and every month is an absolute necessity if you want an excellent credit score. This may seem obvious, but many of our clients fail to pay their bills, even when they have the funds. If you are unable to make a payment, contact the creditor to make payment arrangements. Paying nothing may immediately drop your score.

Percentage of Outstanding Debt – Credit card and debt utilization makes up about 30% of your score. Credit card and debt utilization rate is the amount of debt compared to total limits. For example, if the total debt is $20,000 and you have credit limits of $100,000, the utilization rate is 20%. The lower the better. Once you get over 30%, you should take action to lower the percentage. You should also try to keep each individual account at a low percentage in addition to the total accounts.

Age of Accounts – the age of your accounts make up about 15% of your score. The older the better. That is why you should keep older accounts open.

Type of accounts – This makes up about 10% of your credit score. A good mix of accounts is ideal, such as credit cards, car loans, secured loans, ect. We do not recommend that you obtain unnecessary credit just to raise your score. However, having no available credit could be just as bad. Three to five credit cards or accounts is enough.

Credit Inquires – This makes up about 10% of your score. If you apply or open numerous credit cards, you are hurting your score. Although it is a small percentage, and is often temporary, it does have an effect.

If you have a poor credit score, it can be rebuilt to an excellent score in very little time by improving these factors.