Morningstar Solutions
Morningstar Solutions
Improve Your Credit Score
What Your Credit Score Measures

Your credit score, also known as your FICO score, is a large determinant of the types of credit you have access to, and at what rates.

Your score looks at your overall credit profile, including credit cards, mortages, car loans, and student loans, to see how much credit you have access to and how you are using it. There are five components that determine your score.

Components of Your Score

1. Payment history (35%) - Do you pay all of your bills, and pay them on time?

2. Amounts owed (30%) - how much you owe, the number of accounts with balances, and how much of your available credit you are using

3. Length of your credit history (15%) - The time since accounts were opened and since they were last used

4. New credit (10%) - the proportion of accounts that were recently opened and the number and recency of new credit inquiries.

5. Types of Credit (10%) – do you have a healthy mix of credit types, such as credit cards, a car loan, and a mortgage?

What's Not Included
Your credit score does not factor in your employment status, income, age, gender, or other non-credit-related information. Measures such as debt to income are not included.
What Is a Good Score?
Scores range from 300 to 850. Generally, scores above 720 are considered "excellent," but each lender has its own scale. Scores in the high 600s to low 700s will qualify you for most credit cards and loans, but not at the very best interest rates. Scores below the mid-600s will begin to detrimentally affect your ability to get credit cards and loans, at least with attractive rates. Now more than ever, creditors seek customers with excellent track records for their best offers.
When to Check Your Score

Check your credit report at least once each year. This will not only help show you where you stand, but will also help you identify unauthorized accounts. Quickly dispute inaccurate information or accounts that are not yours.

You are legally entitled to a free report annually from each of the three major providers--Experian, TransUnion and Equifax. It is normal for your score to vary slightly between the three reports. Space out your requests from each so that you can see a new report every 4 months.

Where to Check Your Score
Annualcreditreport.com is the official site to access your free annual credit report. Beware of other sites that offer a portal to download your free reports in conjunction with enrollment in continued credit services for which they will charge you if you do not opt out.
How to Raise Your Score

Focus on the largest components of your score – payment history and amounts owed, which together account for 65% of your score. The two most effective ways to raise your score:

1. Re-establish on-time payments. The longer your history of on-time payments and the further you get from missed payments, the better your score will be.

2. Keep your balance low as a proportion of your total available credit. Do not cancel accounts you no longer use, because doing so would decrease your available credit and thus increase your credit utilization ratio. Similarly, you should not voluntarily reduce your credit limit.

More Ways to Boost Your Score

Space out account openings. A flurry of new credit applications will increase the number of hard inquiries and lower the average age of your accounts, hurting your score.

If you want to close multiple accounts, space those out as well. Remember that closing old accounts reduces your available credit and average account age, which hurts your score.

Keep your rate-shopping period for home and car loans to within 30 days to ensure your comparisons are treated as only one inquiry.

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Improve Your Credit Score
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