Understanding Credit Reports

The three major credit bureaus, Equifax, Experian and Transunion, use these 5 factors  to compile a credit score which banks and creditors will use to determine your eligibility for various types of loan or credit extensions.

  1. Number of Accounts/New Credit (10-12%)
  2. The Types of Accounts (15%)
    • Revolving (credit cards)
    • Installment (student loans, mortgages, auto loans, etc)
    • Open (American Express)
    • Service (Utilities)
  3. Used Credit vs Available Credit (30%)
  4. The Length of Your Credit History (5-7%)
  5. Your Payment History (35%)


Tips for ensuring your credit score is in good health:

Be punctual. Pay all your bills on time each month. Late payments, collections, and bankruptcies have a negative effect on your credit scores.

Check your credit report regularly. Take the necessary steps to remove inaccuracies. Don’t let your credit health suffer due to inaccurate information. If you find an inaccuracy on your credit report, contact the creditor associated with the account, or the credit reporting agencies to have it corrected. Some resources for checking your report are Freecreditreport.com and annualcreditreport.com.

Manage your debts. Keep your credit card account balances below 30% of your available credit limits. For instance, if you have a credit card with a $1,000 limit, you should try to keep the balance owed below $300.

Give yourself time. Time is one of the most significant factors that can improve your credit score. Establish a long history of paying your bills on time and using credit responsibly. You may also want to keep the oldest account on your credit report open in order to lengthen your period of active credit use.

Avoid excessive hard inquiries. A large number of hard inquiries may be interpreted as a sign that you are opening numerous credit accounts due to financial difficulties, or overextending yourself by taking on more debt than you can easily repay. Apply for new credit in moderation.

7 Things to avoid:

  1. Late payments (over 30 days)
  2. High credit balances related to credit limit (>50%)
  3. Large number of credit lines open/available
  4. Store credit cards and promotional schemes
  5. Number of inquiries for credit over 12 months
  6. Length of credit history
  7. Cosigning on someone else’s loan


Not all debt is bad debt.  Click here to learn more about Good Debt vs Bad Debt.