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Updated: Jul 24, 2020
Credit and Creditworthiness
Manage & Increase Your Credit Score
How to understand Credit
When lenders review your credit report and request a credit score for you, they’re very interested in how reliably you pay your bills. That’s because past payment performance is usually considered a good predictor of future performance.
The credit utilization ratio is another important number in credit score calculations. It is calculated by adding all your credit card balances at any given time and dividing that amount by your total credit limit.
Unnecessary credit can harm your credit score in multiple ways, from creating too many hard inquiries on your credit report to tempting you to overspend and accumulate debt.
Your Credit Score And Creditworthiness
Your credit score is a three-digit number that relates to how likely you are to repay debt. Banks and lenders use this score to decide whether they’ll approve you for a credit card or loan or other credit offering. Your score is ranked based on some of the following areas:
The Importance Of Your Credit Score
The higher your scores, the more likely you are to qualify for loans and credit cards at the most favorable terms, which will save you money. Improving your credit scores takes time, but the sooner you address the issues that might be dragging them down, the faster your credit scores will go up. You can increase your scores by taking several steps, like establishing a track record of paying bills on time, paying down debt and taking advantage of some of our offerings designed to assist in building your score. Of course, certain credit score factors are typically more important than others. Payment history and credit utilization ratios are among the most important in many critical credit scoring models, and together they can represent up to 70% of a credit score, which means they’re hugely influential. Focusing on the following actions will help your credit scores improve over time. A credit score reflects credit payment patterns over time, with more emphasis on recent information.
Unused Credit Cards
Keeping unused credit cards open—as long as they’re not costing you money in annual fees—is a smart strategy, because closing an account may increase your credit utilization ratio.
Applying For Too Much
Opening a new credit card can increase your overall credit limit, but the act of applying for credit creates a hard inquiry on your credit report. Too many hard inquiries can negatively impact your credit score.
Dispute Any Inaccuracies
You should check your credit reports at all three credit reporting bureaus (TransUnion, Equifax, and Experian for any inaccuracies. Incorrect information on your credit reports could drag your scores down.