Credit and Credit Scores

Using your credit wisely can help you eliminate debt quicker and transform bad debt into good debt – and it will have certified lenders fighting for your business.

Your credit score. Credit scores are calculated from various data in your personal credit report. This data is often grouped into five categories of descending importance: payment history, amounts owed, length of credit history, new credit and types of credit used. Although each credit-reporting agency formats and reports this information differently, all credit reports contain basically the same information categories. Your Social Security number, date of birth and employment history are used to identify you, but are not used in credit scoring, which considers trade lines, credit inquiries, public records and collection issues.

Improving your score. Raising your credit score is a bit like losing weight: It takes time and there’s no quick fix. And just like a crash diet, quick-fix efforts can backfire terribly. The best advice is to manage credit responsibly over the long haul. Pay your bills on time. Keep balances low on credit cards and other forms of revolving credit. Get current, and stay current, on your payments. Remember that paying off a collection does not remove it from your record, and closing an account doesn’t make it disappear. And always remember: If you’re having trouble making ends meet, contact your creditors directly, or seek the assistance of a legitimate credit counselor.