How to change your credit score

how to change a credit scoreA credit score can make the difference in being approved or denied credit. You can change a bad score once you know what comprises a credit score.

While there are various tips and strategies to change your credit score, the best answer involves some knowledge about how credit scores work.

The following are six facts about credit scores which will help consumers improve credit scores in addition to maintaining good scores:

1. Credit scores are constantly changing
Many consumers do not realize credit scores can change on a daily. Credit information is dynamic (constantly changing) not static (remaining the same). This is the most important fact you need to know about your credit score.

It makes me crazy to hear the experts tell consumers they should check their credit report at least once a year. The reality is consumers should Monitor FICO Scores on a frequent basis; not only to insure accuracy, but also to be aware of your credit score. Knowing your credit score is an absolute must if you are shopping for a mortgage, car or personal loan.

2. What comprises a credit score
The credit score is a 3-digit number used as a predictor of whether you will likely make timely payments. The higher the score, the less likely you will default. Your credit score is based on the information reported in your credit files by your creditors. The information in your credit file is changing all the time if you are actively using credit cards, have a mortgage, auto or personal loan or applying for new credit.

3. What makes the credit score change
The reason credit scores constantly change is that creditors are reporting your payment history, balance, and credit limit to the credit bureaus on a regular basis. This is compounded by the number of creditors you have reporting. All of your creditors report to the credit bureaus on different days. Because the information in credit files is dynamic and fluid, credit scores can change on a daily basis.

4. Payment History
Let’s say you make a late payment on an account. This will have an immediate impact on your credit score when it is reported to the credit bureaus. Literally one day your credit score could be 700; but, if a late payment is reported, the next day your credit score could decrease by as much as 80-100 points!

Payment history accounts for 35% of your credit score. In that same manner, you could begin making timely payments which will change and increase your credit scores over fairly short period of time.

5. Account Balance
The amount owed on an account makes up 30% of your credit score! If you max out a credit card your credit score will suffer as the balance to limit ratio is changed. Credit card balances should be kept to no more than 30% of your available credit limit.

If all of your credit accounts are maxed out this could trigger creditors into believing you are having financial difficulty which may result in your credit limits being reduced. If your credit limits are reduced it may end up having the unintended consequence of making your account balances appear maxed out. The best rule of thumb is to not spend over 30% of your available credit limit. Consumers who maintain low balances but have high credit limits usually have the best credit scores.

6. Each credit bureau can have a different credit score
Creditors can report to one, two or all three of the major credit bureaus. This means your credit score could differ from Experian to Equifax to Transunion. It just depends on which credit bureau the creditor uses.

For instance, most credit unions in California only report to Experian because Experian is widely used in California.  In this case, Equifax and Transunion may not have all the information Experian has about your credit obligations.

As a result a credit score based on the information contained at Experian is going to be different from information contained by Equifax or Transunion. When applying for credit find out which credit bureaus are used. Apply for credit where your highest score will be pulled.

How to change your credit score

  • Reducing your credit card balance to less than 30% of your available credit limit will change your credit score immediately. This strategy will work no matter how large or how small the credit account limit. Reducing balances to no more 10% is optimum and you will see this biggest increase with this type of reduction in account balance.
  • Do not miss payments. If you have a few late payments or you miss a payment begin making on-time payments consistently for the next few months and your credit score will recover.
  • Keep older credit accounts on your credit report. Closing an account may lower your credit score as length of credit history constitutes 10% of your credit score.
  • Deal with recent collection accounts in your credit files by either disputing collection accounts, settling collection accounts or pay a collection in exchange for a deletion from your credit files. Removing a recent collection account from your credit files will boost your credit score. If the collection account is older you may consider leaving it alone. You don’t want to be in the position of disputing an older collection account and having the date of activity updated to look more current.


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