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Credit Scoring Models Explained

To understand your credit bureau risk score, you must understand your credit report information. So we suggest that you first check your credit report from all 3 national credit reporting agencies.

  • Make sure all the information in your report is accurate.
  • Dispute inaccurate items in your report.
  • Pay off any collections or past due amounts that you can.
  • Pay down loan balances if you are able.
  • Try to have a period of 12 to 24 months with no late payments, past dues or other derogatory items.
  • Try to minimize the number of inquiries into your credit report from credit grantors by not applying for new credit unless absolutely necessary. (Note our credit report inquiry does not have an adverse affect on your credit risk score or credit rating.) more ideas below

What else can I do to for my credit report score?

Credit scoring models are complex and often vary among creditors and for different types of credit. If one factor changes, your score may change -- but generally it depends on how that factor relates to other factors considered by the model. Only the creditor can explain what might change your score under the particular model used to evaluate your credit application.

Nevertheless, scoring models generally evaluate the following types of information in your credit report:

  • Have you paid your bills on time? Payment history typically is a significant factor. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy, if that history is reflected on your credit report.
  • What is your outstanding debt? Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score.
  • How long is your credit history? Generally, models consider the length of your credit track record. An insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances.
  • Have you applied for new credit recently? Many scoring models consider whether you have applied for credit recently by looking at "inquiries" on your credit report when you apply for credit. If you have applied for too many new accounts recently, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make "prescreened" credit offers are not counted.
  • How many and what types of credit accounts do you have? Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may negatively affect your credit score.

Some scoring models are not only based on your credit report. They may be based on information not in your credit report. For example, the model may consider information from your credit application as well: your job or occupation, length of employment, or whether you own a home.

To change your credit score under most models, concentrate on paying your bills on time, paying down outstanding balances, and not taking on new debt. It's likely to take some time to change your score significantly.