How to Get the Best Credit Score Rating

There are three credit bureaus in the United States: Experian, Equifax and TransUnion. These companies use a scoring model that ranges from 500 to 850. A score of 850 is considered a perfect score, while a score of 500 will make securing credit difficult. Once you understand how to read your credit score, you'll be able to take action and get the best score possible.

Instructions

1. Understand how to read a credit score. A score of 720 to 850 is the best credit score rating; 700 to 719 is very good; 620 to 699 is average; and 500 to 619 is the lowest. Take a look at your credit score by contacting Annual Credit Report (see Resources below). They provide a free report every 12 months. You should also review your report for inaccuracies, and contact the bureau reporting the error to request a corrections form.

2. Make your loan payments on time. This counts for 35 percent of your credit score, so it's an easy way to boost your score. To make this easier, set up automatic payments with your financial institution's online banking function.

3. Keep your outstanding debt low. For revolving credit, such as credit cards or home equity lines of credit, don't use more than 30 percent of the available credit. For example, if you have a credit card balance of $20,000, don't charge more than $6,000. The amount of outstanding credit you have accounts for 30 percent of your credit score.

4. Avoid taking out too much credit in a short time frame. For example, if you charge $10,000 in credit card debt, buy a house and a new vehicle, all within 30 days, this can negatively impact your credit score. This criteria accounts for 10 percent of your credit score.

5. Diversify the types of loans to take out. The credit bureaus like to see that you can handle both revolving credit (credit cards and home equity lines of credit) and installment loans (mortgage loans and vehicle loans). Having a mix of both types of credit will give your score a boost. This criteria counts towards 10 percent of your credit score.

Tips & Warnings

• Piggyback on a family member's positive credit rating. Just have them co-sign on a loan, which will tie your credit together.

• Avoid filing for bankruptcy, which can drop your credit score at least 10 points.

Resources

• Request Free Credit Reports Here