Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Mar 31, 2020

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The credit score reflected in your credit report, also commonly known as your FICO score, not only determines whether you qualify for a loan, but also the interest rate for the loan. The higher your credit score, the better your chances of being approved for a loan with a favorable interest rate. Credit scores range from 300-850. Those with credit scores below 620 pay higher interest rates on loans and have difficulty obtaining loans. The good news is that the credit scores reflected in credit reports change frequently and consumers have the power to improve their scores even if they have had difficulty paying bills in the past. Several factors can impact your credit score and there are several steps that you can take to improve the credit score reflected in your credit report.

Check Your Credit Report Regularly

Check your credit report regularly with the three major credit reporting agencies, TransUnion, Equifax, and Experian. It is possible that your credit report may contain errors which are negatively impacting your credit score. Check the date on collection accounts on your credit reports and file disputes if necessary. Collection accounts older than seven years are not permitted by law to be reported on your credit report. Often times, the original creditor will sell the past due or charged off account to a collection agency which then attempts to collect the debt and it will improperly continue to show on your credit report.

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Factors That Can Lower a Credit Score

Keep the number of inquiries on your credit report to a minimum. Credit scores will be lower for those who are attempting to open accounts by applying for credit through several sources. The fewer inquiries on your credit report, the higher your credit score. 

Your debt to income ratio could be one of the major reasons for your low credit score. Your debt to income ratio is the percentage of your monthly income that goes towards paying your bills. Paying down the balances on your credit cards or eliminating other debt will improve your credit score substantially. Carrying a balance is not necessarily a negative factor when calculating your credit score, but paying on time and more than the minimum payment will ensure that your credit score will improve over time.

If you are close to the maximum available credit on a credit account and cannot afford to make more than the monthly payment, try asking for a credit line increase. This can improve your credit score because it reduces your debt to equity ratio, which is the percentage of available unused credit. Credit scores are higher for those that have a higher amount of available unused credit because it indicates that credit is being used responsibly and not up to the maximum limit.

The length of your credit history is another factor that affects your credit score. Keep the oldest accounts open even if you no longer need to use them. For example, if you opened a credit account as a college student, keep that account open so that it does not appear that you are a new borrower.    

Credit Report / Credit Repair Resources

For information on how to get free copies of your credit reports, see Federal Trade Commission – Your Access to Free Credit Reports. Also, see AnnualCreditReport.com. For information about how to dispute inaccuracies on your credit report, see Federal Trade Commission – Credit Repair.