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Understand your credit score

Banks, credit card companies and 

other businesses use credit scores 

to estimate how likely you are to 

pay back money you borrow. 

A higher score makes it easier to qualify for a loan or 

lower interest rates. Many scores range from 300-

850, but different companies use different ranges.

You have many credit scores

You can have more than one score, because: 

§ Lenders use different scores for 

different products. 

§ There are many different credit scoring formulas. 

§ Information can come from different credit 

reporting sources. 

For example, your credit card score could be different 

from your home loan score, and the scores you 

purchase online could be different from both of those. 

For some people, these differences aren’t that big. 

But because lenders use different scores, you might 

qualify for lower rates with one lender and not 

another. It can pay to shop around. 

Where do credit scores come from?

Your credit scores are generally based on information 

in your credit reports. This information is reported 

by your creditors to credit reporting companies. The 

three biggest are Equifax, Experian and TransUnion.

Several variables affect your credit score:

§ How many credit accounts you have

§ How long you’ve had those accounts

§ How close you are to your credit limit

§ How much credit you have left

§ How often your payments have been late

§ Other factors

How to raise your score

§ Pay your bills on time, every time. One way to 

make sure your payments are on time is to set 

up automatic payments, or set up electronic 

reminders. If you have missed payments, get 

current and stay current.

§ Don’t get close to your credit limit. Credit scoring 

models look at how close you are to being “maxed 

out,” so try to keep your balances low in proportion 

to your overall credit limit. Experts advise keeping 

your use of credit at no more than 30 percent of 

your total credit limit.
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§ A long credit history will help your score. Credit 

scores are based on experience over time. Your 

score will improve the longer you have credit, 

open different types of accounts, and pay back 

what you owe on time.

§ Be careful closing accounts. If you close some 

credit card accounts and put most or all of 

your credit card balances onto one card, it may 

hurt your credit score if you are using a high 

percentage of your total credit limit. Frequently 

opening accounts and transferring balances can 

hurt your score too.

§ Only apply for credit you need. Credit scores 

look at your recent credit activity as an indicator 

of your need for credit. If you apply for a lot of 

credit over a short period of time, it may appear 

that your economic circumstances have changed 

for the worse.

Your credit report matters as much 

as your score

Mistakes in your credit reports could hurt your 

credit history and credit score, so check them 

regularly. You can get one free credit report from 

each of the big three credit reporting companies 

every 12 months. Go to annualcreditreport.com or 

call 877-322-8228.

When you get your report, look for:

§ Mistakes in your name, phone number, 

or address.

§ Loans, credit cards, or other accounts that are 

not yours.

§ Reports saying you paid late when you paid 

on time.

§ Accounts you closed that are listed as open.

§ The same item showing up more than once (like 

an unpaid debt).

How to fix mistakes

If you find something wrong in your credit report, 

you may contact both the credit reporting company 

and the creditor that provided the information. 

Explain what you think is wrong and why. Include 

copies of documents that support your dispute.

Your credit reports will come with instructions on 

how to dispute mistakes.

Submit a complaint

If you have a credit reporting problem, you 

can submit a complaint:

 Online

consumerfinance.gov/complaint

 By mail

Consumer Financial Protection Bureau

P.O. Box 4503

Iowa City, Iowa 52244

We’ll forward your complaint to the 

company and work to get a response from 

them. You will receive email updates along 

the way and can track the status of your 

complaint online.