Raise Credit Score – Understand the System

If you are fixing your credit report then you realize just how important your credit score is. Your credit score can control your quality of life just as much as how much money you earn.

With a poor credit score you may have been turned away from a job that you are clearly qualified for. You may have been turned down for a credit card or a car loan. The times you have gotten approved it is with a high down payment and an exorbitant interest rate.

However if you can learn how the credit system works then you can use it to your benefit. You can create a higher quality of life for yourself and your family without earning any extra income.

When credit bureaus compute your credit score they use an algorithm or equation. They input your credit history and a computer calculates your credit score.

Your credit score is a way for lenders and employers to measure you. Lenders will often not look at any other factor other than your credit score when you apply for a credit line. You credit score determines how the credit world perceives you.

How can you use the credit system to your benefit? You need to know there are two pieces of information that are most important to the systems equation.

1. Delete negative inaccurate accounts. Derogatory credit items do the most damage to your score and should be removed as soon as possible.

2. Maintain an unsecured revolving line of credit. This is an easy technique that almost anyone can do.

The credit bureaus equation is kept secret and not released to the public. However after review of thousands of credit files it has been learned that having an open unsecured line of credit is just as important as removing negative items.

The unsecured line of credit will improve your credit score because:

1. You are creating positive payment history with every month you pay your bill on time. Also credit bureaus like to see that this account has aged. Meaning it has been an open account for a while.

2. Increase your ratio of debt to credit. This is how much credit you have in relation to how much debt you have. You want to be able to show the credit bureaus that you are not using all your available credit.

Your open credit line will carry more influence on your score if it is unsecured. However if you can not be approved for an unsecured loan then I would suggest a secured credit card.

An open credit line will help you build credit but it is still very important to erase derogatory listings from your credit report. If you can not get an unsecured credit line and do not want a secured line of credit then remove the derogatory listings and reapply.

It is possible for everyone to achieve a 700 credit score for themselves. So start today and erase the derogatory marks and build positive marks on your credit report.