Credit Clean Up

Understanding Your Credit Score

Credit Cleanup

Your Credit Score is determined by 5 factors of differing importance:

35% Payment History

How often do you pay your accounts on time?

Late payments may lead to a lower score.

30% Amounts Owed

How much of your total credit have you used

Less is more! Lowering debt can be the key to a better credit score.

10% New Credit

Have you opened any new credit lines lately?

Opening several accounts in a short time can lower your credit score.

10% Types of Credit Used

Do you have more than one credit line?

Having experience with different types of credit (e.g., car loan and a credit card) can help your score.

15% Length of History

How long have you had credit history?

A longer history of responsible credit use will likely lead to a higher score.

Tips for establishing and maintaining healthy credit

  • Borrow only what you can afford to repay.
  • Make all of your payments on time.
  • Avoid excessive requests or inquiries for credit
  • Have an emergency account to pay for unexpected expenses
  • Check your report annually to contest and remove any erroneous information
  • Keep a high credit line and a low balance. Credit utilization ratios measure this relationship, and lower is better.
  • Do not open new store credit cards just to save on a purchase. New accounts can lower your score, and too many payments can be difficult to manage. Saving 10% on a $300 lawn mower means little if it costs you even just fractionally more on a $300,000 home loan.
  • Do not open new accounts just to transfer balances for an introductory rate. In addition to possibly lowering your score, these offers often have traps. Instead, use them to leverage a lower rate from your existing card company.
  • Do not close old accounts. If you have a good record of payments on old accounts, these will benefit your score. Using them occasionally and conservatively will keep them active and contribute toward a good score.
  • Do not be afraid to use credit. Without the use of credit, you will have no score, and that can be just as bad as a low one.
  • Maintain a variety of account types. A combination of revolving, installment and secured financing along with excellent records of payment will yield a higher score. Still, don't run out and open an account just to have diversity, as this is the least influential factor.