Raise Your Credit Score - The Information Used To Calculate Your Rating And How To Improve It
Your payment history will account for approximately 50% of your overall score and this is the one area that you have the most direct control over. There are four other pieces of information that is used and we will outline them below.
The most important of these is your available credit to debt ratio. This piece of information is how much total debt you have versus how much available or unused credit and is approximately 30% of your score.
In other words if you have $500 of unused credit on your credit card, that is $500 of available credit. The more you have the better and less debt you have the better, however your debt isn't weighted as much as many individuals have large student loans, mortgages, or other finance purchases.
This formula will also look at how long you've been using credit and how old each specific account is. It will factor in how often your credit is being checked because the more often it is looked at the more it will appear that you are trying to use your credit as much as possible. These two factors alone only each account for 10% of your score for a total of 20%.
Payment History - 50%
This is clearly the most important piece of the puzzle to a good or bad credit score. This is were all the positive and all the negative items that are on your credit are going to be looked at and weighed. Unfortunately just having a few negative items regardless of how many positive marks you create will cause you to be seen as a risk by future lenders.
To truly attain an excellent overall score you must not only remove the negative items but you must also build positive marks. It is a common myth that people believe removing negative items from your report is illegal if they are accurate.
However the law says that a negative item can remain for a maximum of seven years, nowhere in the law does it say anything about the minimum amount of time an item must remain on your history. Often you can negotiate a settlement and have the lender agree to stop reporting the item as a part of your agreement.
Furthermore it is estimated that 25% of all credit files have an error on them. In other words one in every four people have something that is not accurate on their file. It is not only your obligation to remove these items but it is your legally entitled right.
You are entitled to dispute and challenge the accuracy of any item on your report that you believe is a mistake or a questionable item. Congress gave you this right in 1970 and this law has continued to be used and amended by Congress even up to the most recent amendment which entitles you to one free copy of your credit report from each bureau every year.
At the end of the day you don't have to live with the high cost, high interest rates, and embarrassment that a damaged FICO score can cause. If you remove the negative marks and create some positive payment history then you can achieve an excellent credit score and enjoy the lifestyle that will follow, even without earning any extra money!