Credit Reports 101

Understanding how your credit score is calculated is a critical first step toward improving it. Once you know how it’s made up, you can identify the areas that need focus.

How can I check my credit score?

There are three major credit bureaus that compile and maintain credit reports: Experian, Equifax and TransUnion. Theoretically, all three of your reports should be the same, but it is not uncommon for creditors to report to only one or two of the bureaus. You can request a free copy of your credit report from all three bureaus once a year by visiting AnnualCreditReport.com or calling 877.322.8228.

How can I improve my credit score?

The best way to improve your credit score is to make sure all payments to creditors are made on time since payment history accounts for 35% of your score. Another way to build credit is to keep your credit utilization to 30% of your credit limit. For example, if you have a $5,000 credit limit, then it’s important to not carry a balance of more than $1,500 on a monthly basis. Another factor is the length of credit history, which makes up 15% of your credit score. The longer you have had your accounts, the better.

You can also boost your score by having a variety of accounts such as a credit card, auto loan, mortgage and line of credit. This credit mix makes up 10% of your credit score. New credit makes up 10% of your score and factors in the number of recently opened accounts and the number of inquiries. It’s important to note that all similar loan inquiries that occur within a 45-day period are considered just one inquiry for scoring purposes. For example, you may apply for several auto loans because you’re shopping for the best rate and term. In addition, accessing your own report does not negatively impact your score.