Credit scores are three digit numbers ranging from 300 to 850 and is calculated using an algorithm using five separate factors. Credit scores rise and fall based upon a consumer’s recent credit history and are directly impacted by consumer behavior. To improve credit scores, there are some things borrowers can do to get their scores back where they need to be.
Timely Payments
The single biggest factor when calculating credit scores is payment history. It’s important to pay credit accounts on the due date but sometimes that’s not always possible. If you pay more than 15 days past the due date it’s likely you’ll incur late fees and higher interest charges but as payments relate to credit scores, negative marks are made when your payment is more than 30 days past the due date. Scores will fall further still when payments are made more than 60 and 90 days past. Making timely payments will repair scores faster than anything else you can do.
Balances
Scores react better when there are balances being paid on time. Your scores will rise when your balances are around one-third of your available credit lines. If your balances are greater than 50% of available credit or even worse exceed available credit your scores will fall. If you have high balances, concentrate on the account with the highest interest rate and make regular payments to get your balances closer to the one-third level.
Stay Still
Finally, don’t apply for any more credit. Each time a consumer applies for a credit account it is logged into the credit report as an “inquiry.” Multiple applications for credit will cause scores to fall and could suggest to a lender the individual is experiencing some financial difficulty. If you simply stay still and don’t apply for credit accounts and eliminate any inquiries your scores will rise.
If you concentrate on these three things, which by the way make up 75% of your total score, your scores will begin to rise on their own. And it doesn’t take as long as you might think. In fact, within just three to six months your scores could repair to a level that qualifies you for a home loan.
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