A credit score is a numeric valuation that lenders use, along with your credit report, to evaluate the risk of offering you a loan or providing credit to you. The FICO score is the most commonly used of the credit scores. It is calculated using different pieces of data from your credit report, including:

• payment history: 35%
• amount of debt relative to credit limit (credit utilization): 30%
• length of credit history (the longer the better): 15%
• types of credit in use (having current installment loans and revolving lines like credit cards helps): 10%
• new credit/recent credit applications (a hard inquiry can ding your credit for several months): 10%

Your credit score affects your ability to qualify for different types of credit – such as car loans and mortgages – and the terms you’ll be offered. In general, the higher your credit score, the easier it is to qualify for credit and obtain favorable terms. Because a lot could be riding on your credit score, it pays to keep track of it and to work towards improving it, when necessary. You can get a free credit report from each of the three big credit agencies – Equifax, Experian and TransUnion – but they will charge a fee if you want to see your actual credit score. The good news: You may be able to get your score for free from your bank or credit card issuer; here’s how.

Changing Times

Barclaycard US and First Bankcard (the credit card end of First National Bank of Omaha) were the first to sign on (in 2013) when the program launched, and since then others have joined in, including Citibank, Chase, Discover, Digital Credit Union, the Pentagon Federal Credit Union, U.S. Bank and North Carolina’s State Employees’ Credit Union. Ally Financial began offering free credit scores to auto loan customers in 2015, and Bank of America subsequently made credit scores available to cardholders for free.

Getting Your Score

If your bank or credit card issuer offers free credit scores, you should be able to check your score either online by logging into your account, or by reviewing your monthly statement. If you’re not sure whether your bank provides access to free scores, or if you have trouble finding your score, contact customer service for assistance. There are other resources to see your credit score or credit report for free, as well. If you’re wondering whether you should pay to see your credit score, the answer is probably “no.”

In addition to free credit scores, some banks offer benefits designed to help you understand – and improve – your score. First National Bank, for example, gives you 24/7 online access to your FICO score and shows you which key score factors have affected your number. And Barclaycard US provides your credit score, plus up to two factors that affect it, a historical chart that tracks it and email alerts any time your credit score has changed. 

It’s important to note that not all credit scores are created equal, and the various banks and credit card issuers may provide access to different scores. Soon after the launch of the FICO Score Open Access Program, credit bureau Experian introduced a similar program, which allows banks to share its VantageScore credit score with consumers. 

Today, these two systems operate on the same 300 to 850 point scale, and each uses similar criteria to calculate the scores, but they weigh each item differently. With FICO, for example, your payment history represents 35% of your score; for VantageScore, it accounts for around 40%. The result: The two scores will generally differ, even for the same person, on the same day. That’s not necessarily a bad thing, but it’s something to be aware of so that you can make sure you are comparing apples to apples when tracking your scores.

The Bottom Line

Your credit score affects your ability to obtain credit, and the terms you’ll be offered. Up until recently, the credit score industry was fairly covert, and it was difficult (or expensive) for most people to get their hands on their score. Today, however, a growing number of banks and credit card issuers provide credit scores free of charge, which is hugely valuable for consumers trying to track and improve their credit health. 

Your credit score affects your financial life in more ways than one. When you apply for a loan or credit card, lenders base approval decisions in part on your credit health. Not only that, but your credit score can also influence the interest rates you’ll pay for credit cards, car loans, mortgages and other lines of credit.

FICO® and VantageScore® are the two most common credit scores for consumers. Both range from 300 to 850, with a higher score indicating lower credit risk. Knowing where you fall on the spectrum is important, especially if your goal is to get the best rate possible on your credit accounts.

The difference between a fair credit rating and a good credit score may be just a few points but it can make a world of financial difference when it comes time to borrow. Here’s everything you need to know about the good, the bad and the excellent when it comes to credit scores.

Credit score ranges: Is 700 a good credit score?

FICO® and VantageScore® calculate credit scores, but it’s the lender who decides whether a credit score is excellent, good, fair, poor or bad. What constitutes a good or excellent score ultimately depends on where the lender sets its cutoffs.

Broadly speaking, credit score ranges can be broken down along these lines:

RANGE	CATEGORY
Excellent	750 to 850
Good	700 to 749
Fair	650 to 699
Poor	550 to 649
Bad	549 & Below

Most lenders consider a credit score between 700 and 749 to be good, but the lower cutoff can be anywhere from 680 to 720. If the cutoff is 700, a drop of just one point can push you into more expensive financing.  That’s why it’s imperative to know your credit standing and whether you’re near the border to the next category, lower or higher.

Remember that credit scores are fluid, not fixed. The information on your credit report is what shapes your credit score calculations, and that information changes every time new data is reported (every payment, every monthly balance, every account). You have credit reports at each of the three main credit bureaus: Equifax, Experian and TransUnion. The credit score calculated for each report can be different, because not every creditor reports to all three.

Each bureau calculates your credit score. Your score from each bureau is likely can change from month to month, based on factors like your payment history, the amount of available credit you have and use, whether you’ve recently applied for or opened any new credit accounts, the types of credit you use and the overall age of your credit history.

FICO® and VantageScore® provide the algorithms that the bureaus use to calculate your score. Neither company shares the details of those algorithms, but both companies use more or less the same factors to calculate your score. Payment history, including delinquencies and collections, and credit utilization (or the amount of debt you have in relation to the amount of credit available to you) carry the most weight.

You don’t have just one FICO® score or VantageScore®. Each scoring model has several variations, generally industry-specific. For example, your auto loan credit score is a little different from your credit card credit score. Lenders use different scores for different credit decisions and the lines between the score ranges may be drawn differently.

We begin by asking which credit reporting company is best overall. Is it Experian, Equifax, or Transunion that comes out on top? The answer depends on your perspective. Lenders and consumers have vastly different definitions of quality.

We chose to define best (highest quality) as the credit bureau most closely meeting the standards of accuracy, the speed of updates, ease of dispute handling, and data security.

Most Truthful

The credit bureau that provides the most accurate report is the one closest to being free from error or defect; consistent with a standard; or faithfully representing or describing the truth.

A common courtroom oath provides an outline for balancing precision.

1. The truth – is the information displayed on the report free from error?
2. The whole truth – does everything about a consumer appear in the report?
3. Nothing but the truth – does every item on the report belong to that person?

Lenders and consumers view the accuracy and quality issue very differently.

1. Lenders choose what bureau to use based primarily on the amount of negative information gathered and presented that could pertain to an applicant. Banks and lenders are predisposed to avoid large losses via default. This factor varies most by geography.
2. Consumers view the accuracy issue differently. They want incorrect negative marks removed quickly (faster updates) through a convenient process (easiest disputes). Consumers are predisposed to avoid rejection.

Most Secure

The credit bureau that properly safeguards the sensitive financial data of hundreds of millions of consumers is most secure. A data breach could expose the entire country to identity theft risks.

Equifax was hacked sometime during 2017. In September of that year, they announced that a security breach might have compromised the social security numbers, birth dates, and other personal information of about 143 million U.S. consumers.

Does this mean that Experian and TransUnion are better with their data security? We do not know. We simply know that the hackers penetrated the Equifax network first.

How long good credit information stays on your credit report

The good news is, good credit stays on your report for much longer than bad credit does. Any credit account that was paid off on-time and is in good-standing will stay on your report for upwards of 20 years. 
Sometimes, people believe it’s bad to have past credit history on your account for a long period of time. This isn’t the case. Rather, this is exactly the type of information you do want on your account as it shows a lender you have lots of financial experience and are responsible to manage a loan. A long, positive and on-going credit history is what you should strive for on your credit report.

What type of credit information shows up on your credit report

Whether good or bad, your credit report contains a large amount of information about your past spending and repayment habits. The two credit bureaus in Canada, Equifax Canada and TransUnion Canada, have access to this information and use it to determine your creditworthiness — or your credit score.
Here’s the information that shows up on your report:

1. Credit transactions: credit cards and lines of credit
2. Secured loans: mortgages, car leases or personal loans
3. Bank accounts: closed chequing and savings accounts
4. Legal judgements: lawsuits or court rulings
5. Debt collection: if sent to a collection agency
6. Credit inquiries: read our post How Do Credit Checks Impact Your Credit Score to learn more
7. Registered items: a form of security interest granted over an item of property
8. Consumer proposals: the legal agreement between you and a lender

There are many things that can lower your credit scores. Some things, like missing a payment, shouldn’t come as a shock, but others, like closing an account, may come as a surprise.

Here are some common reasons why your credit scores may drop and the credit factors that contribute to them.

1. You’ve missed or made a late payment

Your payment history is typically the most important credit factor used to calculate your credit score. It tells lenders how likely you are to repay debts in the future.

If you’ve missed payments or made late ones, lenders may be hesitant to extend credit to you — or may offer you credit, but at a higher interest rate. The longer you make your payment after your due date, the more it could affect your credit scores.

And if your payment is past due and sent to a collection agency or you declare bankruptcy, it can also adversely affect your credit scores and stay on your credit report for six or seven years.

2. Your credit utilization is too high

Your credit utilization is typically the second most important credit factor when it comes to how it affects your scores. It may also be called “use of available credit.”

To determine your credit utilization, add up the balances on your various credit products, such as credit cards, lines of credit and car loans, and divide the total by your total credit limits.

Lenders are most concerned about how much credit at your disposal you’re actually using, not your credit limits on their own. Even if you keep making payments on time, you’re seen by lenders as a higher risk of default if your credit utilization is high.

3. You recently closed (or opened) an account

If you’ve recently opened or closed a credit account, this can negatively impact your credit scores. Generally speaking, the longer your credit account is open and in good standing, the more it may help to improve your credit health.

This means that if you close an old credit account, such as the first credit card you signed up for in university, and your other credit accounts are relatively new, your scores could drop.

For example, if you’re doing a balance transfer from an old credit card to a new credit card to take advantage of a low introductory interest rate and you close your old account, that may cause your credit scores to drop.

3 tips for improving your credit health

If your credit scores are not as high as you’d like them to be, there may be things you can do to help improve your credit health.

Tip #1: Don’t make late payments.

If possible, aim to always make your credit payments in full by the due date.

If your cash flow is tight, try to at least pay the minimum payment (you can find this on the statement from your lender) to keep your credit account in good standing.

If you’re unable to make the minimum payment, let your lender know immediately to see if a special arrangement can be made, such as spreading your payment over a longer period of time or negotiating a lower interest rate.

“To make sure you never miss a payment, I recommend setting calendar reminders to log in and make payments to your credit accounts twice per month. This could help ensure that you’ll never be late for a payment and give you ample opportunity to review your statements and recent transactions for inaccuracies and fraudulent charges,” says Stephen Weyman, personal finance blogger at HowToSaveMoney.ca.

Tip #2: Keep your credit utilization below 35 percent.

The Financial Consumer Agency of Canada recommends keeping your credit utilization at less than 35 percent of your total available credit. Generally, having high credit utilization may hurt your score as your lender may view you as more likely to default.

For example, if you have two credit cards with a $6,000 total limit, try to keep your combined balances below $2,100 (35 percent of your $6,000 total available limit).

Tip #3: Keep your older credit accounts open.

While it may be tempting to close older credit accounts that you no longer use, consider keeping them open. For example, it might be worth keeping your first credit card, even if you seldom use it, provided there’s no annual fee.

If your credit card has an annual fee and you’re not using it, consider closing or downgrading it to a non-annual fee version (if available as an option).

Be sure to use your credit card every so often to avoid an inactive fee or your issuer closing your account. An inactive fee is a fee charged by credit card providers if you don’t use your credit card for a time period (typically at least a year).

If you’re one of the 250,000 people who immigrated to Canada this year, welcome! Aside from acclimating yourself to a new country, home, and job, you’ll also quickly realize the benefits of building a credit history with a strong credit score.

Whether you’re looking to lease a car, buy a home, get a cell phone, or get a credit card, your going to want to start building a credit history right away to get access to lending products at the best rates available. Here are a few tips to help you get started:

Apply for an unsecured credit card: Apply for a Canadian credit card as soon as possible. Many of the big banks offer new immigrants a credit card with a low line of credit as part of their initial banking package, such as Royal Bank’s “Welcome to Canada” package or Scotia’s “Start Right” program.  Once you get your credit card, start using it right away.

Apply for a secured credit card if need be.  A secured credit card requires you to put money on deposit with the credit card issuer as collateral in the event you default on your credit card balance. Not every person will be eligible for an unsecured credit card without a credit history, this is especially true of older adults. Also, if you’re looking for a credit card with a larger line of credit, you’re best bet may be a secured credit card. The advantage of using a secured credit card, over a debit card, is that your repayment habits will be reported to the credit bureaus, allowing you to build that all important credit history. We highly recommend to evaluate

Refresh Financial Secured credit card, as they specialize in products customized to fit the needs of the newly-arrived consumer, and can also offer a loan to start building credit safely.

Apply for a mobile phone. Some phone carriers, like Telus, specifically state that no credit history is required to get an account, and that they will report your post-paid subscription to the credit bureaus. While you may be tempted to get a pre-paid plan, a post-paid plan will help you build a credit history.

Pay your credit card bill on time. Whether paying the minimum or more, make your credit card bill payments on or before the due date. 35% of your credit score is based on payment history. If you’re late, even by an hour, your credit history will be negatively impacted. Paying on time does not mean paying your entire balance. Paying on time means paying at least the monthly minimum payment, which is shown on your credit card statement. Understand how long you have after receiving your credit card bill to make your payment, called your grace period. It’s usually around 21 days. To help you pay on time, you can set-up automatic monthly payments through your bank account.

Pay off your balance in full each month. While carrying a balance and making your payments on time will help your credit history more than paying in full each month, we would never recommend carrying a balance just to build your score. Using your credit card and paying it off every month will help build your credit score as well, just not as fast. But it’s a better strategy than paying excessive interest charges just to build a credit history.

Get different types of credit. The credit bureaus love people with different sources of credit. So if you can manage to get a credit card, cell phone, or car loan (usually with a large deposit), it will help you build a credit history with a strong score that much faster.

Financial institutions will usually start using your credit history after it’s been established in good standing for a period of 18 months. But several other factors will be considered as well, including your savings history, net worth, income and ability to provide a security deposit, such as a down payment on a mortgage. These strategies should go a long way towards establishing a Canadian credit history for new immigrants.

Your FICO® scores (an acronym for Fair Isaac Corporation, the company behind the FICO® score) are credit scores. It’s a sort of grade based on the information contained in your credit reports. Unlike the grades you were given in school — A through F — base FICO® scores generally range from 300 to 850. And the higher, the better.

Because there are three major consumer credit bureaus (Equifax, Experian and TransUnion), each with its own version of your credit report, you can also have different credit scores. For example, you can have a FICO® score based on your Equifax® credit report, a FICO® score based on your Experian® credit report, and a FICO® score based on your TransUnion® credit report. To further complicate things, you can also have VantageScore® credit scores from each bureau.

Additionally, FICO also creates many different credit-scoring models for lenders in different industries. So your base FICO® scores may not be the same ones a mortgage lender sees if they request your mortgage-specific FICO® scores, for example.

You probably don’t need to worry about all these nuances when buying a home, but you should still have an idea of what your scores look like. You can get your VantageScore® 3.0 credit scores (based on similar factors to your FICO® scores) from Equifax and TransUnion for free on Credit Karma.

How do my FICO® scores affect my ability to get a mortgage?

Lending a huge amount of money is risky business. That’s why mortgage lenders need a good way to quantify the risk, and your FICO® scores — with all of the data and research that go into them — fit the bill.

Different lenders have different requirements for their loans. And because there are many different types of mortgages from many different types of lenders, there’s no one single minimum FICO® score requirement.

How can my FICO® scores affect my mortgage interest rate?

When a loan officer gets your mortgage application, they may use a pricing grid to figure out how your credit scores affect your interest rate, says Yves-Marc Courtines, a chartered financial analyst with Boundless Advice. Generally, higher scores can mean a lower interest rate, and vice versa.

From there, a mortgage loan officer will likely look at the rest of your loan application to decide whether your base interest rate needs any adjustments. For example, if you’re making a smaller down payment, you may be given a higher interest rate, says Courtines.

A bank’s pricing grid may change on a daily basis depending on market conditions. However, here’s an example of what you might expect your base interest rate to be, based on your credit score, on a $216,000, 30-year, fixed-rate mortgage.

Sometimes, people talk about your credit. What they mean is your credit history. Your credit history describes how you use money:

• How many credit cards do you have?
• How many loans do you have?
• Do you pay your bills on time?

If you have a credit card or a loan from a bank, you have a credit history. Companies collect information about your loans and credit cards. 

Companies also collect information about how you pay your bills. They put this information in one place: your credit report.

What is a credit report?

Your credit report is a summary of your credit history. It lists:

• your name, address, and Social Security number
• your credit cards
• your loans
• how much money you owe
• if you pay your bills on time or late

Why do I have a credit report?

Businesses want to know about you before they lend you money. Would you want to lend money to someone who pays bills on time? Or to someone who always pays late?

Businesses look at your credit report to learn about you. They decide if they want to lend you money, or give you a credit card. Sometimes, employers look at your credit report when you apply for a job. Cell phone companies and insurance companies look at your credit report, too.

Who makes my credit report?

A company called a credit reporting company collects your information. There are three big credit reporting companies:

• TransUnion
• Equifax
• Experian

These companies write and keep a report about you.

Can I see my credit report?

You can get a free copy of your credit report every year. That means one copy from each of the three companies that writes your reports.

The law says you can get your free credit reports if you:

• call Annual Credit Report at 1-877-322-8228 or
• go to AnnualCreditReport.com

Someone might say you can get a free report at another website. They probably are not telling the truth.

What is a credit score?

A credit score is a number. It is based on your credit history. But it does not come with your free credit report unless you pay for it. 

A high credit score means you have good credit. A low credit score means you have bad credit. Different companies have different scores. Low scores are around 300. High scores are around 700-850.

Do I need to get my credit score?

It is very important to know what is in your credit report. But a credit score is a number that matches your credit history. If you know your history is good, your score will be good. You can get your credit report for free.

It costs money to find out your credit score. Sometimes a company might say the score is free. But if you look closely, you might find that you signed up for a service that checks your credit for you. Those services charge you every month.

Before you pay any money, ask yourself if you need to see your credit score. It might be interesting. But is it worth paying money for? 

Credit scoring is used by lenders, insurers, landlords, employers, and utility companies to evaluate your credit behaviour and assess your creditworthiness.

1. Applying for a loan. Your credit score will be a big factor into the decision of whether you are approved or denied your application for more credit. Your credit score will also affect the interest rate and credit limit offered to you by the new credit grantor – the lower your credit score, the higher the interest rate will be and the lower the credit limit offered  – the reason for this is you are considered more of a credit risk.

2. Applying for a job. A potential employer may ask your permission to check your credit file and based on what they read, they may decide not to hire you due to your poor credit history. Yes, having bad credit could cost you a job!

3. Renting a vehicle. When you sign an application to rent a car, the rental company can check your credit history to determine what their risk may be when they loan you their property. So although you are not applying for credit, the application documents you sign provide your written permission to access your credit information.

4. The same is true when applying for rental housing – the landlord may assess your tenant worthiness and their risk by factoring in your credit rating and score, and they could pass you over for someone with a better credit rating.

Other “derogatory” factors which negatively affect your credit rating and the Credit Bureaus don’t like to mention to you are:

1. Errors
One of the major causes of point loss to your credit rating are bureau reporting errors. (They can also cost you financially as shown in the CBC report on credit reporting mistakes) Errors can be delinquent accounts reporting on your file that do not belong to you, late payments that were not late, and credit that is created from identity fraud  – therefore not your credit. The Credit Bureaus are paid by the creditors who pull credit bureau files and in turn who report to them. Credit reporting is done electronically, and Credit Bureaus accept the information they are sent without any investigation into the accuracy of the information. Therefore, is it critical that you pull your credit bureau file at least once every year. Only you will know when there is an error on your file, and it is up to you to have the credit bureaus fix it.

Order your file here: TransUnion and Equifax

Look for these common errors:

• Wrong mailing addresses
• Incorrect Social Insurance Number
• Signs of identity theft
• Errors in your credit accounts
• Late payments
• Unauthorized hard inquiries

If there is an error on your file you must contact the Credit Bureau, then it is up to the Bureau to investigate your complaint and to verify the information contained in your file by contacting the reporting creditor. When contacted by the Credit Bureau, the reporting creditor will have to verify the item they have placed on your file. You are entitled to be part of that process.

2. Moving/Time at Address
As previously discussed, a large number of credit file requests within a short period due to moving will lower your credit score. But on top of that, the length of time at your current address will influence your score, so try not to move a lot as it will affect your credit rating. The longer you remain at one address, the more points you receive.

3. Changing jobs/employers frequently
The longer you stay at a job, the higher points your credit score receives. You are seen as having a secure job and therefore being a secure, less risky credit consumer.

4. Having no mortgage, or no housing information on your file
The Credit Bureaus assign certain points for those who have mortgages and those who rent, and deduct points for those whose housing situation is unknown to them. As soon as you pay off your mortgage, the reporting account is removed from your file and you are in the unknown category, which will actually remove points from your credit rating! Credit card and other credit account history will remain on your account even after being paid off and closed, but unfortunately a paid mortgage does not benefit your credit rating. Imagine, you own your own home and that does not benefit your credit rating – does that even make sense? Also, not all mortgages report to the Credit Bureaus.

5. Having high revolving credit balances
When you have high balances that are rotating between different credit accounts, this is a warning sign that you could be in financial trouble and therefore you could be considered a credit risk.

6. Having no debt
Believe it or not, having no debt is bad for your credit score! Here we go again – if you don’t need to borrow money creditors will be trying to throw it at you. If you do need to borrow money and have no debt or debt history well, you will have a harder time of it. If you do not have a history of credit use on your file to provide something for creditors to evaluate, they will see that as a risk, and you will be deducted points on your score for not having credit accounts.

Credit scoring is used by lenders, insurers, landlords, employers, and utility companies to evaluate your credit behaviour and assess your creditworthiness.

1. Applying for a loan. Your credit score will be a big factor into the decision of whether you are approved or denied your application for more credit. Your credit score will also affect the interest rate and credit limit offered to you by the new credit grantor – the lower your credit score, the higher the interest rate will be and the lower the credit limit offered  – the reason for this is you are considered more of a credit risk.

2. Applying for a job. A potential employer may ask your permission to check your credit file and based on what they read, they may decide not to hire you due to your poor credit history. Yes, having bad credit could cost you a job!

3. Renting a vehicle. When you sign an application to rent a car, the rental company can check your credit history to determine what their risk may be when they loan you their property. So although you are not applying for credit, the application documents you sign provide your written permission to access your credit information.

4. The same is true when applying for rental housing – the landlord may assess your tenant worthiness and their risk by factoring in your credit rating and score, and they could pass you over for someone with a better credit rating.

What information is used to calculate my credit score, and what factors will lower my score?

If you have tried looking on the consumer reporting agencies’ (CRAs, also know as Credit Bureaus) websites, you have seen they provide VERY little information as to how your credit score is calculated. They believe this information is proprietary and therefore their “secret”. They do, however, provide a list of the main factors which affect your credit score:

1. Payment History
Equifax says: “Pay all of your bills on time. Paying late, or having your account sent to a collection agency has a negative impact on your credit score.”
TransUnion says: “A good record of on-time payments will help boost your credit score.”

2. Delinquencies
Equifax lists: “Serious delinquency; Serious delinquency, and public record or collection field; Time since delinquency is too recent or unknown; Level of delinquency on accounts is too high; Number of accounts with delinquency is too high”
TransUnion lists: “Severity and frequency of derogatory credit information such as bankruptcies, charge-offs, and collections”

3. Balance-to-Limit Ratio
Equifax says: “Try not to run your balances up to your credit limit. Keeping your account balances below 75% of your available credit may also help your score.”
TransUnion says: “Balances above 50 percent of your credit limits will harm your credit. Aim for balances under 30 percent.”

Ok, so avoid maxing out your credit – because if you don’t really need more credit you’ll be able to get it, and if you do really need it then you are more of a risk.(Funny how that works)

4. Recent Inquiries
Equifax says: “Avoid applying for credit unless you have a genuine need for a new account. Too many inquiries in a short period of time can sometimes 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 actually repay. A flurry of inquiries will prompt most lenders to ask you why.”
TransUnion says: “Avoid excessive inquiries. When a lender or business checks your credit, it causes a hard inquiry to your credit file. Apply for new credit in moderation.” 

Also of concern is that inquiries for non-credit purposes (such as utility companies and car rentals), will cause your credit score to drop without adding points for having credit in good standing, as with a credit card that you pay off every month. So be careful to only apply for credit you really need.

5. Length/history of Accounts
Equifax says: A “common negative score factor… [is the] length of time accounts has been established is too short”
TransUnion says: An established credit history makes you a less risky borrower. Think twice before closing old accounts before a loan application.”

Having a longer history on your credit accounts earns you more points, so avoid closing your accounts if you may need them in the future. A good credit history is built over time – sorry, but there is no quick fix for this one.

6. Variety of Credit Accounts
TransUnion says: “A healthy credit profile has a balanced mix of credit accounts and loans.”

Having a mix of credit products (credit card, retail store card, line of credit, car loan, etc) will procure more points on your file than having only one type of credit, such as only credit cards.

7. Too many accounts
Having a lot credit accounts, especially if many of them carry balances, is another warning sign of financial distress, so if the Credit Bureaus think you have too many, they will deduct points.

A collection entry on your credit report, including medical collections, can severely lower your credit score and in many cases prevent you from obtaining a mortgage or auto loan.

Before we get into how to remove collections from your credit report, I want to go into detail about what a collection entry actually means, how badly it can hurt your credit score, and how long collections stay on your credit report if you don’t take any action.

When I was in college I got a cellphone with Sprint. The phone service didn’t work well so I switched to Verizon but forgot that I owed Sprint a payment.

Long story short, it ended up going to Sprint collections and showing up on my credit report. I went ahead and paid the collection because I thought that would also remove it from my credit report.

However, it wasn’t removed, it was just changed to“paid collection”. I followed these steps to get it removed

1. Request a Goodwill Adjustment from the collection agency

The first step is to mail the collection agency a “goodwill letter”.

This is basically a letter that explains your situation, such as you want to purchase a house but can’t because of the collection on your credit report, and you’re kindly asking that they remove the collection out of goodwill.

2. Dispute the Collection Using the Advanced Dispute Method

If the goodwill letter fails to get the debt collection removed from your credit report, the next thing you should try is the advanced dispute method.

For this method, you will need a current copy of your credit report. TransUnion will provide you with all your credit reports –plus they include your credit score for free.

Once you have your credit report, find the entry of the collection you want to be removed and verify every piece of information that is listed.

If you find anything that is inaccurate, note it. This method works because rather than simply disputing the entire entry, you are going to write an advanced dispute letter that lists especially what is inaccurate.

Check the following items on the collection entry for inaccuracies:

• Balance
• Account number
• Date opened / Date closed (check all dates)
• Account status (e.g., Closed)
• Payment status (e.g., Collection)
• Credit Limit
• High Balance
• Anything else that appears to be inaccurate

After you have noted the inaccuracies you found, use my advanced credit dispute letter templateto write your letter.

Using this letter, you will demand that each piece of information is corrected or that the collection be removed.

This makes it more difficult for the credit agencies to verify the collection and hopefully result in them simply removing the collection altogether.

3. Demand That the Collection Agency Validate the Debt

If you’re unable to find any inaccuracies on the collection entry on your credit report, next you should write the collection agency and demand that they validate the debt.

Under section 809 of The Fair Debt Collection Practices Act, collection agencies are required to validate debts they are attempting to collect if you request that they do so.

The rub here is that you only have 30 days to make the request after their initial contact. If they are unable to validate the debt, you can ask them to remove it from your credit report.