We will discuss six credit factors that credit bureaus such as TransUnion and Equifax consider when determining your credit score.

Payment History

Payment history is a high impact category. It is important to ensure that you pay all your bills when they are due. Many times, credit unions and mortgage companies offer a grace period in which they do not report late payments to credit bureaus. It is important that you inquire about the policies for your accounts before assuming your creditors offer grace periods, as even a few late payments can greatly impact your credit score.

Credit Card Utilization

Credit card utilization is a high impact category. A good rule of thumb is to keep your balances below 29% of your credit limit. Therefore, if you have a credit card with a limit of $1,000 your balance should not exceed $299 at all times. The lower your credit balance is the higher your credit score will be. You can lower your credit card utilization by transferring credit card balances to a new credit card or a personal loan. However, applying for a new credit will negatively impact the "Age of Credit History" and the "Hard Inquiries" factors. These two factors which will be discussed in more detail below. If transferring credit card debt is not an option then consider paying down your balances by focusing on paying off credit cards with higher utilization first. You could also request a credit limit increase for one of your credit cards to help lower your utilization rate. Often, if you are in good standing with your credit card company they automatically issue limit increases. However, it does not hurt to call and ask for a credit increase. Before authorizing a credit increase ensure to verify with your credit card company that there will not be a hard pull on your credit.

Derogatory Marks

Derogatory marks are a high impact category. Derogatory marks should be avoided at all costs. They can stay on your credit report anywhere from 7 - 10 years! A tip to ensure that all your payments are made on time is to consider setting up automatic bill pay or auto pay to prevent accounts from becoming past due and going to collections. These derogatory marks cannot be reversed. This is why the credit score of individuals in pre-foreclosure or foreclosure suffer greatly and require about 7 years to recover.

Age of Credit History

Age of credit history is a medium impact category. This factor is useful because it shows lenders whether you have experience using credit and and whether you are using your credit responsibly. You can improve your credit score by keeping all your accounts opened and in good standing over time. Keep in mind that your "Age of Credit History" factor is calculated by taking the average of your oldest account and newest account. Therefore, opening a new account can negatively impact your credit score.

Total Accounts

Total accounts is a low impact factor. Lenders use this factor to verify whether you have a variety of accounts and whether you are able to used them responsibly. It is recommended that you have a minimum of 11 opened accounts and in good standing.

Hard Inquiries

Hard inquiries is a low impact factor. Hard inquiries result from credit applications and can stay on your report for up to 2 years; however, the effects fade over time. It is recommended that you have no more than 2 hard inquiries per year.

Notes to Remember

Ensure that you check your credit history often. You can do this by creating an account with Credit Karma. Review the information on your credit history and dispute any transactions that you did not authorize with the respective credit bureau. It is recommended that you add a fraud alert to your credit if you suspect fraud or if you want to add additional protection to your credit. Further, you may consider purchasing an Identity Theft Protection plan for higher protection. If you are looking to improve your credit score focus on the factors that have a higher impact on your credit before the low factors.