Once you finally get rid of student debt or pay off your auto loan, you may be impatient to get any trace of it wiped from your report.īut as long as your payments were timely and complete, those debt records may actually help your credit score. If you struggle with high balances and mounting interest payments on your cards, consider consolidating with a 0% introductory rate balance transfer credit card, but make sure you know when the rate will increase and by how much.
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VantageScore, though, does consider whether you pay in full or carry your balance month to month. Your utilization rate at the time your issuer reports is what's used for your score. Ulzheimer points out that FICO’s scoring systems don’t differentiate between those who pay in full each month and those who carry a balance. The date your credit card provider reports to the credit bureaus may also impact your utilization rate. “In fact, people who have the highest average FICO scores have a utilization of 7%.” “The higher that ratio, the fewer points you’re going to earn in that category and your scores are absolutely going to suffer,” he says. Ulzheimer recommends trying to maintain a utilization rate of 10%. Weigh your balances relative to your credit limit to ensure you’re not using too much available credit, a practice that can indicate risk. Anything that would indicate non-performance of a liability is going to harm your credit score.” 2. “And filing bankruptcy is a horrible idea. “You want to avoid things like late payments, defaults, repossessions, foreclosures, and third-party collections,” says John Ulzheimer, credit expert, formerly of FICO and Equifax. From a lender’s perspective, an established history of timely payments is a good indicator you’ll handle future debts responsibly, too. Pay your bills on timeĪccording to Experian, payment history is the most influential factor for both your FICO and VantageScore. A score of 700 is considered "good." The better your credit score, the better interest rates and terms you’ll be offered by lenders. Both FICO and VantageScore (the score developed by the three major credit bureaus - Experian, TransUnion, and Equifax) will range from 300 to 850. Your credit score is meant to tell lenders whether you are a high or low-risk borrower.
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