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Home > Learning Center > Articles > How To Improve Your Credit Score
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The Key To A Higher Score!
 
 
How To Improve Your Credit Score
 
There are five major categories of credit information used to determine your credit score and improvement in any one of these would result higher in your credit score.
 
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How To Improve Your Credit Score

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The Key To A Higher Score in Canada - Secret Revealed!
 
How To Improve Your Credit Score
Secret Revealed
 
Up to the end of the 20th century, your credit score was the biggest secret which was not known to any one except some companies with whom you have some credit relations, such as your mortgage provider or a credit card company. This was gone public to openly share these credit scores with the consumers by the Fair, Isaac Co., the major supplier of credit scoring software, also known as FICO score in the year 2000.
 
What is a credit score?
 
A only tool used by credit providers, lenders or brokers to determine your ability to repay your debts. A credit score is a statistical formula that translates personal information from your credit report and other sources into a three-digit score, number ranging from 300 (highest credit risk) to 800 (lowest credit risk). A higher score means you are less likely to make late payments or default on the credit extended to you. Your credit score will change as the information in your credit report changes over the time.
 
There are five major categories of credit information used to determine your credit score and improvement in any one of these would result higher in your credit score. These are shown here according to the percent of effectivness from high to low: Payment History, Total Debt, Credit Age, New Credit Application and Credit Overview.
 
Payment History (35%)
 
Paying your current bills on time is the single most important factor in obtaining a high credit score. This category includes retail accounts, credit cards like Visa and MasterCard, installment loans such as those for a car or education, loans from finance companies, and home mortgages. Also included in this category are matters of public record such as bankruptcies, liens, wage garnishments, and collection accounts.
 
> The key to a higher score: Pay your bills on time!
 
Total Debt (30%)
 
This category considers the amount of debt you owe on your various credit accounts. If youve maxed out your available credit, this could indicate that you are overextended financially and wont be able to make your payments on time or repay your debts completely. This category also examines how many of your accounts carry balances and how much money youve already repaid. Closing accounts with a zero balance does not generally improve your score in this area.
 
> The key to a higher score: Keep your credit card balances low!
 
Credit Age (15%)
 
The longer youve had credit accounts the higher you will score in this area. The age of your oldest account and the average age of all your accounts are used in determining your score. Old accounts that have gone unused are also considered.
 
> The key to a higher score: Establish good credit and keep accounts active!
 
New Credit Applications (10%)
 
Opening multiple credit accounts within a short period of time represents a greater risk of becoming overextended. Each time you apply for credit an inquiry is made into your credit history and these inquiries show up in your credit report. A high number of credit inquiries will lower your score.
 
Some inquiries are not considered in your score. These include: requests by you for your credit report, inquiries from companies for pre-approved offers or companies that already do business with you, along with inquiries from potential employers. Some requests for credit are treated as a single inquiry especially when you are shopping for the best loan rate.
 
> The key to a higher score: Only apply for and open new credit accounts when you need them!
 
Credit Overview (10%)
 
This category examines the types of credit accounts you have and how many of each. Can a person have too many accounts? Yes and no. It really depends on whether you have an established credit history or no credit history at all.
 
> The key to a higher score: Open credit accounts only if you intend to use them!
 
Dont despair if you have a low score or are just beginning to establish credit. Your credit score will change for better or worse depending on how well you understand and use these five keys to your advantage in planning your financial future.
 
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