Almost anyone knows how important it is to have a good credit score. A good credit score helps borrowers  get access to loans and more favorable interest rates when borrowing money. A good credit score is the beginning of financial health today.

But do you know how a credit score is determined? Understanding what’s used to determine the score is half the battle towards achieving a higher credit score. Here are some of the top factors:


Good creditworthiness means paying bills on time. This is the percentage of payments made on time for the duration of the credit history. It plays a big role in determining creditworthiness. Just a couple of late payments could significantly impact the score… for the worse. The best way to avoid late payments is to set up automatic bill paying. Another helpful way is to place a reminder on the calendar.  


The percent of the total credit card balances divided by the total credit card limits provides creditors with the total available credit used. The lower the credit card utilization, the higher the credit score.


More is better… To a point. Consumers that have more “lines of credit” can have higher scores because it shows lenders are willing to give credit. It’s best to have a good mix of different types of credit for good credit health. The caveat… Only apply for credit you need.


When applying for a mortgage or auto loan, a “hard” credit inquiry is initiated on the credit report. One inquiry has little impact on a credit score. Multiple inquiries begin to erode the score and can have a bigger impact. A “soft” inquiry occurs when you check the rate to see what you qualify for. If uncertain, check with the potential creditor or lender before applying to see if they’ll be doing a hard or soft pull on your credit.


The longer the line of credit, the stronger the credit rating. Keep older cards open and active. Start applying for credit early in life.


Negative terms on a credit report include collections, tax liens or bankruptcy. Derogatory remarks can remain on your credit report for 7-10 years. It shows a lender mismanagement of credit may have occurred. Start rebuilding healthy credit again. It will improve the credit rating and gradually weigh in your favor.


For more information, contact Treasure Coast Insider Blogger, Mona Leonard at 772-530-6131 or