How to Understand and Improve Your Credit Score

A good credit score is always important. Understanding how credit scores work can help you improve and continue to maintain an excellent credit score. Credit scores range from 300 to 850. Scores of 700 and above are considered very good to excellent credit.

Instructions

1

Check your credit report. AnnualCreditReport.com is the only way to access your free credit report, which the biggest three credit reporting agencies are required to give you once a year. You will get your report, but not your score. If you see any mistakes, make sure you remove them.

2

Pay your bills on time. This is the basic rule for achieving good credit; 35 percent of your credit score is based on your payment record. If you have a hard time remembering when your bills are due, set up automatic payments with your bank. Like we said earlier, times are tough, so if you can't make all of your payments do the best you can under your circumstances.

3

The length of your credit history accounts for about 15 percent of your score. Make sure to keep your oldest credit cards active -- the longer you have used credit, the better it is for your score. Just because you have a credit card doesn't mean you are building history. If you are paying your credit card off every month, this is not going to help build your credit. You need to let a balance carry over sometimes.

4

The amount of debt you carry relative to your credit limits accounts for 30 percent of your score. Maxing out credit cards is bad for your credit. A good rule to follow is to only spend 50 percent of your credit limit on any given card.

5

The amount and types of credit accounts you have can also boost or decrease your credit score. A mix of installment loans and credit cards may help to improve your score. Be careful, though; too many finance company accounts or credit cards can hurt your score.

6

Applying for too many accounts too close together can ding your score. Requesting a copy of your own credit history does not count against you, but if creditors pull your credit frequently, it can hurt your credit score.