How Can I Improve My Credit Score?

There are two things that modern man cannot escape – death and taxes.  Well, if you live in the United States and Canada, you can add one more thing – credit scores.  Yes, indeed, you can safely say that credit scores permeate every aspect of modern life, from seeking employment and looking for a house to live in to getting credit for your purchases big and small. The important thing to realize is that you can improve your credit score.

However, not all of us may know how to interpret the credit score, much less how to improve it for better credit opportunities.  Well, this article should remedy that situation!

Understanding your credit score

The credit score is provided by any of the three credit reporting agencies of Equifax, Experian and TransUnion in the United States as well as PRBC in Canada.  It is computed based on a common formula provided for by the Fair Isaacs Corporation (FICO) although the weight for each of the factors in the formula varies from one credit bureau to the next.

However, we can safely assume that the weights for each factor will look like this:  payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and types of credit used (10%). These factors are added up to make your final credit score, which can range from a low of 300 points to a high of 850 points.

Keep in mind that the lower your score, the higher your credit risks and, hence, the lower your opportunities for credit.   For most lenders, the cutoff credit score for favorable consideration for credit approval is pegged at 620 points.  If your score goes lower than this figure, you are considered a subprime debtor.

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