In This Section
From the ABA Foundation
A person’s credit score is one of the factors that lenders consider when they extend a line of credit or loan (e.g., auto loans, mortgage loans or personal loans). Lenders often use the number to determine rates, terms and risk. FICO and Vantagescore are the most widely used credit scores and range between 300 and 850. From a lender’s perspective, a higher score equates to lower risk, which often translates to more favorable credit terms and better rates.
The following factors account for a consumer’s credit score:
The first step to improving your credit score is reviewing your credit report. You can obtain a free copy of your report at AnnualCreditReport.com or 1 (877) 322-8228. Your credit report includes the following information:
Once you access your report, determine if there are any errors. If you find any mistakes, you have a right to dispute the information, and can do so by contacting the three credit reporting bureaus: Equifax, Experian, TransUnion.
In addition to correcting any erroneous data, check what you need to improve. Typically, you will want to focus on:
When you maintain both cards, you have a credit utilization ratio of 30% ($0+$3,000/($6,000+$4,000). If you close the account with $4,000, your credit utilization ratio increases to 50% ($3,000/$6,000).
If you need assistance, contact a professional credit counselor at the National Foundation for Credit Counseling.