A credit score is a statistical appraisal of your creditworthiness. It’s a swift and uncomplicated means for banks to assess whether or not you can pay back loans.

There are several factors that go into calculating your credit score, including:

1. How you pay your bills

2. How extensive is your credit history

3. What’s your credit limit on credit cards and how much of it you use

4. What type of credit you have (is it is mixture of auto loans, credit cards and mortgages or all credit cards? 

5. How much credit and what types have you applied for recently

What is a good credit score? In general, a good credit score is somewhere between 650 to720. An excellent credit score is above 720. Those are the numbers you need to strive for to get the best interest rates.

How to Boost Your Credit Score

Your first step toward improving your credit score is paying your bills on time. Your bill payment history, particularly your recent history, accounts for a percentage of your credit score. So paying bills on time can be a big boost in improving your credit score.

Next, outline your credit cards with the highest balances and compare to the available credit on the card. Pay those first. For example, if you own a credit card with a  $1,000 balance and $2,000 available credit and another card with a $3,000 balance and $20,000 available credit, you’d want to pay down the card with the $1,000 balance first.

This is because your credit fico score is based upon how much credit you use as a fraction of the credit available to you.

Preferably, your credit balances should be no more than 40% of the credit available to you.

Finally, don’t close out credit card accounts. It’s advantageous to leave the accounts open and not utilize them than to close them out.  This shows responsibility to creditors on how you manage your credit wisely.  Based upon the credit bureaus statistical appraisal, it drives your credit score up!

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