HOW TO IMPROVE YOUR CREDIT SCORE

Your credit scores usually determine the price you pay for your money (your mortgages, your auto loans 

and leases, your credit cards, business loans, etc.). Perhaps the most significant part of your credit 

report is your credit score. Credit scores range from 350 to 850, with 850 being the best possible 

credit score that you could receive, and 350 being the worst possible credit score. There are five factors 

that determine your credit score:


YOUR PAYMENT HISTORY: 35% IMPACT ON YOUR CREDIT SCORE

Paying debt on time and in full has a positive impact. Late payments, judgments, charge-offs, collection 

accounts and bankruptcies have a negative impact. If you have had any bankruptcies within the last 7 

years, it will seriously affect your ability to borrow or establish new credit accounts.  If you have had any 

judgments within the last several years, it is very important that you pay off the judgment and get a 

"satisfaction of judgment" from the court. Any unsatisfied or recent judgments will make a bad dent in 

your credit scores and adversely affect your ability to borrow. Usually, judgments and liens must be paid 

prior to the closing. Timely mortgage payments are weighted heavily by the scoring systems and are 

one of the most vital requirements that lenders look for when evaluating your credit history. Many times 

a single late mortgage payment within the last 12 months can hold up your file or spell the difference 

between the best interest rate and the next credit level. Your payment history on other debts (car 

payments, credit cards, etc.) is also given a lot of weight.

The credit scoring systems evaluate how many late payments you have had and whether they were 

30, 60 or 90 days late, or whether they are currently in default, with default being the worst situation. 

Additionally the systems look at whether the late payments were consecutive. If you only have one or 

two minor late payments on your report with no other derogatory marks, your score will not be terribly 

affected, but you will have a tough time getting over the critical 700 level.  Here are four practical steps 

that you can implement to improve your credit score in the area of "Payments":

  • Make all your payments on time.
  • Past dues on any account will destroy your score - bring your delinquent accounts current 
  • immediately.
  • Pay your bills before they go to a collection agency.
  • Check your credit report for accuracy on a regular basis; and make sure that disputed bills are not 
  • negatively affecting your credit scores.

THE BALANCE YOU OWE VS. YOUR AVAILABLE CREDIT LINES: 

30% IMPACT ON YOUR CREDIT SCORE

Keeping your credit balances below 50% of your available limit is very important. Keeping your balances 

below 30% of your available credit is even better. For instance, if you owe $10,000, and you have 

$100,000 of credit available to you, you are only using 10% of your available credit line. On the other 

hand, if you owe $10,000 and you only have $10,000 available to you, you have "maxed out" your 

available credit and your credit scores will be very negatively impacted. Therefore, it is not how much 

you owe, but how much you owe compared to what you are able to borrow. Here are three practical 

steps to improve your credit score in this area:

Don't close your credit accounts unless it is necessary to do so. It is better to have many open 

accounts with little or no balance than to have just one or two accounts regardless of the balance.

Don't concentrate large balances on just a few accounts. Pay outstanding debt down as close to zero 

as possible, and evenly distribute the remaining balance across all your open credit lines. The key is 

to keep the balances down below 30% or at the very least 50% of your available credit line(s).

Call your credit card companies and try to increase your credit limits if they can do so without pulling a 

new credit report.

 

YOUR CREDIT HISTORY (HOW LONG YOUR ACCOUNTS HAVE BEEN 

OPENED): 15% IMPACT ON YOUR SCORE

The longer your accounts have been opened, the higher your score will be; newly opened accounts will 

bring your score down. Here are three practical steps for you to improve your score in this area:

Don't close your credit accounts. If you must, close the newest ones instead of the oldest ones. Your 

score will improve over time if you keep accounts open and use them every once in a while. Think twice 

before jumping on that latest 0% credit card offer or opening a new card just to get a 10% discount at a 

department store.If you don't have much of a credit history, and you are planning on taking out a 

mortgage in the future, it may be a good idea to establish a few open credit lines with little or no balance 

on them. Although newly opened accounts tend to lower your score initially, they will improve your 

score once they've been open for awhile, somewhat active and paid off with little or no balance.


TYPE OF CREDIT THAT YOU HAVE OPEN: 10% IMPACT ON YOUR 

CREDIT SCORE

A good mixture of auto loans and leases, credit cards and mortgages is always best. 

Too many credit cards is not a good thing, and having a mortgage does increase your score. 

Practical steps to improve your score in this area include: (1) Having 3-5 revolving credit cards open is 

optimal.; and, (2) Having a good mix of auto loans, credit cards and mortgages is better than having 

only credit cards.


NUMBER OF RECENT INQUIRIES MADE BY CREDITORS: 

10% IMPACT ON YOUR SCORE

Inquiries affect the score for one year from the time they're made. Your score isn't impacted when you 

check your own report. It's only affected if a potential creditor checks your credit. These include 

department stores, as well as credit card, auto finance and mortgage companies. Here are three steps 

you can take to improve your score in this area: (1) Multiple auto and mortgage inquiries are treated as 

only one inquiry if made within 45 days of each other. So, it's better to shop for a car or a mortgage 

over a two week time-frame, rather than to prolong it over a longer timeframe. (2) Don't apply for a lot of 

credit or open multiple credit cards at the same time; and, (3) If you're thinking of applying for a 

mortgage within the next 90 days, it would be good to wait until after your loan closes before you apply 

for any new credit.

Source: CMPS Institute

By: Tony Jao

Regional Manager-Residential Mortgage
NMLS: 7536
Investors Bank
tjao@investorsbank.com
(718) 312-2513
267 Fifth Ave,
New York, New York 10016

Corporate NMLS: 411729



Fernando Branco, GRI, ABR, CNE
Lic. Assoc. Real Estate Broker
Residential Real Estate
Commercial Sales & Leasing 
Graduate Realtor Institute (GRI) 
Accredited Buyer Representative (ABR) 
Certified Negotiator Expert (CNE)
R New York
641 Lexington Ave, NY NY  10022
c: (212) 321-0115
e: fbranco@weRnewyork.com
Working by referral. Let me help you find a home too!!

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