Do you know what criteria that FICO (Fair Isaac Corporation) uses to rate your credit scores?  They use five standards to determine what your credit scores should be.  FICO is the most commonly used credit score rating to determine credit worthiness when getting credit.

• Your payment history. In other words, how well do you pay your obligations.  Do you pay them on time or are you always late?   Are there any bankruptcies or other negative factors on your credit report?  Your payment history is the most important criteria when it comes to determining credit scores.
• Second is your credit utilization ratio. How much you’re using of your accessible credit.  For example, you have a credit card that you can charge up to $1,000.  You’re using $100 of that card.  So, you’re using 10% of your credit utilization.  You should try to keep that total number under 30%.
• Third is the length of your credit history.  When did you open your credit account and how long has it been opened?  The longer the time an account has been open, the more it helps your credit score.
• Fourth are the kinds of credit you have. The more varied the types of accounts, the higher your score will be although this isn’t the highest portion that makes up your score.  So, you want to include things like credit cards, student and/or auto loans, mortgages, and any other kind of credit.  Having said that, I don’t recommend you get a loan just to diversify the kinds of loans you have.  But, a combination of loans that you’re paying promptly shows you can handle different kinds of credit reliably.
• Last are inquires for new credit. If you’re applying for new loans all the time and/or credit cards, these inquiries (also called hard inquiries) will lower your score temporarily.  Lenders look at your activity and if you ask for too many new loans in a brief amount of time, it becomes a red flag to lenders.

Moral of the story:

In order to improve your credit scores, please be aware of the criteria FICO uses to rate you.  I like to use Credit Karma to determine where my scores are at.  Credit Karma uses Vantage scores, not FICO but it will give you an idea of how well you’re doing.