Source: www.pueblo.gsa.gov/cic_text/money/creditscores/your.htm

Just one late payment can trigger a decrease in your credit ranking, costing you thousands of dollars in the years following.Your credit score can substantially impact your life in many ways. Not only does this three-digit number determine whether or notyou can qualify to obtain financing for large purchases, it is the primary factor in establishing the terms of repayment, includinginterest rates and the amount you can borrow. Your score can also influence insurance rates, your ability to rent a home andemployment opportunities.Although this number is a derivative of an undisclosed statistical formula, having a better understandingof the factors that make up your score and what you can do to initiate improvements will help ensure your credit rating is at thehighest level possible.

Where Is Your Credit ScoreHeading?

Be wary of credit repair clinicspromising to correct inaccurateor incomplete information on yourreport for a fee. Anything they cando legally, you can do yourself atlittle or no cost and the benefityou receive will be well worth theinvestment of your time and effort.Complete a form online or senda letter to the consumer reportingcompany to notify them of whatinformation you think is inaccurate.Include copies of documentationthat support your claim. Be sure toprovide your complete name andaddress and be clear about yourrequest for each item to eitherbe removed or corrected. Senddocumentation through a trackedservice so that you have proof ofwhen it was received. Any itemthat cannot be verified must beremoved from your report. Uponrequest, the consumer reportingagency is also required to sendnotices of corrections to anyonewho received your report in thepast six months.

Disputes and Discrepancies

Components of a Credit Score

Payment history—about 35%

The easiest way to raise an ailingcredit score is to make all of yourpayments on time each month.Consider setting up automaticpayments and pay more than theminimum due whenever possible.This will help reduce the amountof interest you incur and make youa more desirable borrower.

Amount of debt—about 30%

Keep the ratio of your outstandingbalance to available credit as lowas possible on all of your creditcards; less than 50% is good, butbelow 30% is ideal. Splitting a highbalance among multiple cards maywork to improve your debt ratio,but opening new accounts to dothis can counteract the benefit. Ifyou do not plan on applying fornew credit or a loan in the nearfuture, it may make more senseto carry the balance on the cardwith the lowest interest rate sothat more of each payment goestoward the principal.

Length of credit history—about 15%

Hold on to at least one low-interestcard and keep it active by using itregularly, even if you pay off thebalance completely each month.The accounts with the longesthistory of regular payments helpyour rating.

New credit—about 10%

Avoid applying for new creditaccounts if you plan to securea major loan in the near future.Multiple credit inquiries are asign that you are having troublesuccessfully securing a loan andmay represent a high risk to alender. However, multiple inquiriesfrom the same type of creditor,such as a mortgage bank, areonly counted once if submittedwithin a short period of time.

Other factors—about 10%

Accurate negative informationincluded in your report can affectyour score for many years. If youplan on applying for a mortgageor car loan, consider waiting atleast twelve months from the datethe matter was reported. You arepenalized less for negative issuesthat are more than a year old.