People ask me all the time as to what will affect their credit score. The simplest explanation is that your credit score is based on your debt-to-income ratio, along with other factors. The more debt you have, in comparison to your income, the lower your credit score will be. To have a good credit score (ranging anywhere between 650 to 740), try reducing your debt to less than 30% of your available credit. For example, if you have credit cards with credit limits of $10,000, you should have less than $3,000 of debt on those cards. To have an excellent credit score (ranging anywhere between 740 to 850), you should have less than $1,000 (or 10%) debt on those cards.
While the calculation of credit scores is a mystery, we do know what affects your credit score and what doesn’t.This article by Wendy Connick, of The Motley Fool, discusses 3 items that directly affect your credit score and 3 items that do not. If you would like to see your credit score improve over the next few months, pay specific attention to paying your taxes, paying your bills, and requesting higher credit limits. To see the full article of what affects your credit score and what does not, click here.