Credit Repair Tips

Considering a Home Loan? These credit repair tips can help you get better mortgage rates. A recent poll found that 49 percent of adults didn’t understand that a credit score measures credit risk.

Your credit score is your financial reputation. It’s used by lending agencies, landlords, insurance agents—even potential employers—to help determine their level of risk in taking you on. It will also determine the rates you pay on loans, including mortgage loans. Understanding what goes into a credit score can be a powerful tool to help you get it in the range you desire and keep it there.


Computing Your Score

Credit scores range from 300 to 850 points and are computed by a formula created by the Fair Isaac Corporation (FICO). Scores measure the likelihood that you will repay your debts on time, based on your previous credit activity. The higher the credit score, the better the loan rates.

The three major credit bureaus (Experian, TransUnion and Equifax) use the FICO formula, but it’s possible to have three different scores because creditors can report to any or all of the bureaus. These differences in types of accounts, credit limits, payment history and balances can mean up to 50 points difference in a credit score.

The most important factor in computing your score is payment history, followed by amounts owed and length of credit history. New credit and types of credit used are weighted the same (see chart).

Get Your Credit Report

Everyone is entitled to one free credit report per year from each of the three credit reporting agencies. Your credit report contains the information used to compute your credit score. It can be obtained by visiting in a new window) or by calling 1-877-322-8228. Your credit score won’t be included in the free report, but can be purchased at the same time your report is pulled for a small fee.

Improve Your Score

Keep in mind that your score is a snapshot of your credit history on the day the report was pulled. You can improve your credit score over time. Because the most important factor in your score is you payment history, the fastest way to bump up your score is to pay bills on time, every time. 

Other tips:

  • Check your credit report and fix any inaccuracies. Your credit report will contain instructions on how to report and correct errors.
  • Keep balances low on credit cards and other types of revolving credit. Your total debt should be no more than 20 percent of your net monthly income.
  • Pay off debt rather than moving it around. While credit cards with 0% introductory rates are tempting, remember that those rates are introductory and come with lots of strings attached.
  • Don’t close accounts in good standing as a short-term strategy to improve a score. If you have a credit account you don’t use and it has no annual fee, stow the card and keep it safe. Your credit score takes into account the total available credit and how you use it.
  • Only open credit accounts as needed. Each time you apply for credit, your score is lowered slightly and it may take a few months to bring the score back up.

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