Five Surefire Ways to Improve Your Credit Score

April 24, 2012 - PRLog -- Do you know your credit worthiness? Have you been surprised by high interest rates or have you been denied when you have applied for credit. Many people have no idea what their credit worthiness is and how it affects them until they are confronted with the above scenario. As an entrepreneur, your credit is critical to getting financing as you grow, and a commercial credit score with Dunn and Bradstreet lends credibility.

Who looks at your credit score? Let’s see, suppliers, vendors, lessors, landlords, lending institutions, and business customers can look at your commercial credit score. Insurance companies, landlords, employers, lending institution or anyone issuing credit can look at your personal credit score. Do you think it’s important to know about your credit score and your credit worthiness when you own a business? You betcha!

Do tell, what is a credit score?

Every business that extends credit wants a degree of trust in ensuring that we are able to pay what we owe when it’s due. This includes car dealerships, credit card companies, furniture stores, leasing companies and mortgage lenders just to name a few. A credit score estimates your credit risk based on your credit report. For this they rely on credit reporting agencies for this information.

There are three major reporting agencies that businesses rely on for this information; Equifax, Experian, and TransUnion. Lenders may look over your credit report, but the majority of their judgments about your worthiness are based on your credit score, also known as your FICO score. FICO stands for Fair Isaac Corporation and is the world’s most widely used credit scoring system. Your FICO scores are calculated based on your past credit performance and fall between 300-850.  Lenders generally look at scores of 700 or above to give preferred credit terms to. You may also visit http://www.myfico.com for more information.


You can definitely improve your credit score but it is important to know that quick fixes can backfire.  Raising your score is like getting your body in shape, it takes time, discipline and dedication.  

What’s in Your Credit Score?

Payment History: Approximately 35% of your score is based on your payment history.

Amounts Owed: Approximately 30% of your score is based on how much you owe.  

The Length of Credit History:  This affects approximately 15% of your score.

New Credit Established:  This accounts for approximately 10% of your score.

The types of credit in use:  This accounts for approximately 10% of your score.

Five Surefire Ways to Improve Your Credit Score

1.   Pay your bills.  Pay the full payment before its due date.  Late or minimum only payments will greatly lower your FICO score.  Of course collections and bankruptcies are surefire credit killers.

2.   Watch your balances.  Keep them low on your revolving credit accounts.  When you exceed 50% of your credit limit, it will lower your FICO score.  Strive to keep your balances at 30% of your credit limit. Keep smaller balances and spread them out over more accounts.  A maxed out card may harm your score especially if you have more than one that is maxed out.

3.   Old and long credit are assets.  Rather that close your old accounts, keep them open and stop using the cards. Cut them up.  This will help your FICO score.  A longer credit history is an asset.  The overall unused credits on these older accounts look attractive on your balance-to-limit ratio.

4.   Avoid opening new accounts.  If you apply for credit frequently, or when a business inquires about new credit in your name, these inquiries are recorded.  Your score does allow for rate shopping but be aware of the details regarding rate shopping and inquiries. New accounts and applications for credit can make a person look risky or less stable.

5.   Diversify your accounts.  Having a variety of loans can help with your credit score such as car loans, mortgage loans rather that just having credit cards.  It paints a nice picture showing good credit management.

There are many things that are affected by your credit score besides just qualifying for credit.  Your credit score affects the rate that you get on new sources of credit such as credit cards, mortgage loans and auto loans for example. Your credit score also affects your car insurance premiums. Insurance companies believe that a person’s credit history also predicts accident frequency as well as fraudulent claims.

Check your credit score frequently. This will help you look for mistakes and catch possible identity theft. You are allowed one free credit report per year from all three of the reporting agencies. For more information contact the Annual Credit Report Service at:

P.O. Box 105281
Atlanta, CA 3033348-5281
1-877-322-8228
www.annualcreditreport.com

To find more about your commercial credit score visit http://www.dandb.com/