I review dozens of credit reports every week. And when I go through the account info, the first 2 things I look for are payment history (any late payments and how long it’s been since reported) and balances on credit cards or credit utilization (percentage of used credit).
These 2 categories make up 65% of a persons FICO score, which can impact scores significantly.
If your credit card balances are reporting over 30% of the credit limit, it’s lowering your scores. First course of action would be to pay those down and rapid rescore those balances (takes about 7 days to update). Once updated it will drive up your credit scores. The higher percentage used before the update, the higher the score increase. If your balances are over the limit and you pay down below 30%, the score increase will be significant. Never let an account report over the limit, you lose additional points.
Next, if you have late payments reporting on an account it’s recommended to call the bank and request a “good faith deletion” of the late payment. Some banks allow this typically if it’s an isolated late payment. If you have multiple lates reporting, they’ll most likely not give the deletion. Also, the more recent the late payment reporting, the more of an impact to your scores. A late payment from 5 years ago isn’t as important to your score as a late payment 5 months ago. If you are “past due” on any account I strongly recommend getting current and rapid rescoring the current status which can additionally raise scores.
Included in the payment history category are collection accounts. Outstanding collections (unpaid) are typically actively reporting monthly. This process is called “re-aging” the collection to the credit bureaus to hurt your scores as a “new” collection. Paying your collections stops this “re-aging” process which will help your scores over time. But paying your collections will also allow a greater opportunity for a deletion of the collection account either through disputes or an agreement from the collection company at time of payment (pay for delete). Credit repair or disputing collections that you do not plan on settling is a waste of time. These collection companies actively fight your disputes if not paid, as this is the main tactic they use to have you pay the account. Paid collections aren’t a priority for them to answer a dispute on. Credit repair is most effective on paid collection accounts.
Length of credit history, credit mix, and new inquiries aren’t major role players in your credit scores. However, if you’re only using credit cards it’s advised to open an installment account (auto, personal, etc). This will add in a mixture of credit to help scores. If you have only new credit, ask a family member to add you to a long standing credit card account as an “authorized user”. This will show on your credit report and push back your credit age by many years to help your scores. And last but not least, limit your hard inquiries into your credit. This is when a bank pulls your credit report when you apply. Don’t shop for credit cards month over month, nor car loans or mortgage loans. Do your credit and loan shopping within a 2-4 week period. You can have multiple banks pull credit in a small time frame and not impact your scores much. It’s when you apply month over month where it can become a negative factor to your credit scores.
President and Certified Credit Expert