Credit scores are measured by three credit agencies: TRANS UNION, EQUIFAX, and EXPERIAN.
Credit agencies use consumer’s pay history of open accounts, one of them is known as revolving credit, to determine your credit rating. In most cases, 40% of your credit score is determined by revolving credit accounts.
The key to improving your credit score is to keep credit card balances under 30% of available credit.
Always try to address any and all collections, judgement liens, and any potential credit damaging matters before they report on your credit.
If you have zero or very little credit established, start by opening up a secured credit card at your bank or credit union. Every secured credit card is created by opening up a savings account. Your credit limit is then determined by the amount you deposit and hold as a steady balance in that savings account.
If you want to improve your credit rating and have old (over 24 months and currently not re-reporting) open collection accounts on your credit report, paying them off will not help your cause. In some cases, paying off old negative credit may negatively affect your credit score ratings!
It isn’t fair, but by paying off old negative credit you are in fact doing the right thing at the wrong time by reactivating an old negative account with a fresh new date. If you have and wish to pay off some collection accounts, please go to the CONTACT US page so I can give you some advice before doing so.