How to tell if you have Bad Credit and what you can do to Increase your Credit Score

The FICO score ranges from 300 to 850. If your score is in the higher end over 720, you have excellent credit. While there is no way to know exactly how your score is calculated there are some factors that contribute to your credit score.

Late Payments

Your credit report shows how many times you were late or missed a payment. It is listed in increments if 30, 60 and 90 days. To increase your credit score, start paying all of your debts on time.

Percentage of Credit Used

If you frequently “max out” your credit cards, it can impact your credit score. Make sure you keep your balance at less than 50 percent of your credit limit.

Length of Time You’ve Had Credit

If your credit history is fairly new your score will be lower. People with high credit scores have usually had credit of some type for a number of years; this includes their mortgage and other debts.

Number of Credit Cards and Inquiries

Not only is every credit card you own on your credit report, they also keep of record of how many you’ve applied for. If you have too many cards or apply frequently it will reduce your credit score. To raise your credit limit your applications and pay off and close out cards if you have more than two or three.

Type of Credit You Have

If all of your debt is credit cards and other revolving credit debt, it can negatively affect your credit score. Lenders like to see installment loans, like mortgages or car loans on your credit report. These usually give you a consistent payment history.

These are some of the things that affect your credit score, but there are other things lenders look at when deciding if you have bad credit. A lender may look at your credit to income ratio. They would use that to determine if you can afford to pay all of your debts based on your income. Your salary may also be considered as well as the type of job you have. If you’re a seasonal worker, it may be harder to get some types of credit.

All of these factors combine together and in some instances amounts to you having bad credit. Some are more important than others you’re your charged off credit card will reflect more negatively than your 10 credit inquiries. That’s why it’s important to check your credit reports regularly.

Get Proactive

It’s important to dispute any information that is and incorrect. If the amount of the debt or the payment information is wrong dispute it, if the creditor does not respond within a given time, this information must be removed.

Bad debts can only remain on your credit report for 7 years after the last payment. Bankruptcies and judgments will remain on your credit report for 10 years. You have to make sure these are removed after that time has past.

Each credit reporting agency must provide a free copy of your credit report annually. By checking every year and seeing where there may be potential credit problems, making payments on time, clearing up past bad credit and limiting credit applications you can improve your credit in time.