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John Rowley


Saturday, March 23, 2013 - Article by: John Rowley - Angle Financial Services - Message

What Makes Up a Credit Score

The good news: you took the advice of all the financial experts and checked your credit score. The bad news: your score is lower than you would like. If you find yourself looking at a low score, there are plenty of ways for you to start rehabilitating your credit, but some will be more effective and faster acting then others. To fix your credit score as fast as possible, follow these steps:

1. Check your credit report for accuracy
One of the first things you should do is ensure that all of the information on your credit report is accurate. Credit bureaus occasionally make mistakes, and you should also check to be sure you have not been the victim of identity theft. Correct any errors as soon as possible.

2. Make sure your credit limits appear on your report
When your credit card companies report your history to the credit bureaus, they should also be reporting your credit limit. Without a limit listed, the credit calculating software will consider your cards to be at the limit or "maxed out." The further your balance is from the limit and the closer it is to zero, the higher your score. The software will deduct from your score in percentage zones: Any balance higher than 70 percent of your maximum limit is in the highest zone and will cause the most damage to your score. The next zone is between 70 and 50 percent, than between 50 percent and 30 percent.

Once you make sure that your balances are present on your report, work to pay down your accounts as much as possible. If you are unable to make a significant dent on your balance, distribute your balances between multiple cards, keeping all of the balances as low as possible and out of the 70+ percent zone.

3. Pay past due accounts
After correcting all errors, look for a column titled PAST DUE. This is a list of all delinquent accounts and the software the credit bureaus use to calculate your score punish you the most for these accounts. If you have limited funds, pay off these accounts first in order to see the fastest boost in your score.

4. Pay new liens or charge-offs
Any liens or charge-offs applied to your account within the past two years are wreaking havoc on your credit score. You should pay off your balances on these accounts as soon as you pay off your past due accounts. However, once those liens and charge-offs are older than 24 months, they have done all the damage they can do. Paying them off after 2 years will not help your credit score, so put all your old liens at the bottom of the pay off priority pile. Once you have paid off any of these liens, be sure your lien holder reports the account as paid to the credit bureau.

5. Do not close credit cards
When the credit crunching computer software calculates your score, it looks at the ratio between your debt and your available credit. If you have a total limit of $10,000 across multiple cards and you have charged $5,000 worth of debt, you have a balance that is 50% of your total credit limit. However, if you close one of your credit cards, say one with a $2,500 limit, you have effectively reduced your overall credit limit to $7,500 and raised your debt to credit ration to 66%, dangerously close to the 70% zone.
If you have absolutely no self control or more than 6 open credit cards, you might be the exception to this rule. The optimal number of credit cards for an individual is between 3 and 5. If you have more than 6 cards, close the ones you have opened in the last 2 years first. Then close your department store cards and the ones with the lowest credit limit, until you reach 5.

6. Keep old credit cards active
15% of your credit score comes from the age of your credit, in this case, the older the better. The logic is that the longer you have had an account open, the less likely you are to default on that account. If you close your oldest cards, you will decrease the average age of your credit and this can reduce your score.
However, just keeping the card open and in your wallet will not maintain your credit's age. You must use each of your credit cards at least every 6 months or your cards will be deemed "inactive" and will no longer be counted by the credit calculating software. The phrase "use it or lose it" applies here, meaning you want to keep the benefits of a low balance and a positive payment history on those older credit cards. The one thing all scores over 800 have in common are a credit card that has seen more than 20 years of use.

You are entitled to a free copy of your credit report once a year, an offer you should take advantage of. You can obtain at When you do receive your credit report, check to ensure the figures are accurate and act quickly to correct any mistakes. This may include any clerical errors, identity theft issues or incorrect information. If your credit score is low, you should begin working on a financial rehabilitation plan with a Credit Repair Specialist, to begin correcting your credit profile.

John Rowley is the President of Angle Financial Services. John has over 20 years experience reviewing credit reports. He can be reached at 302-735-PLAN (7526) or on the web at:

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