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Our credit score informs much of our lives, but most people don’t know the basics about their credit score; what it is, how it’s calculated, or how to improve it. While credit counseling and credit repair services can help you with your score, it’s always good to know some basics yourself.
Your overall credit score is made up of three individual credit scores, calculated by the companies TransUnion, Equifax and Experian. These companies have different ways of measuring your credit, so the scores may be different for each, although usually not too far off of each other. Knowing your score from each can help you determine which companies have all the right information for you.
The credit bureaus — TransUnion, Equifax and Experian — track how you use credit, from credit cards to loans to mortgages. But even they can make mistakes. In fact, hundreds of thousands of mistakes are made every year, but most people aren’t aware of them. Always check your credit reports to make sure the bureaus aren’t making mistakes.
How do you check for mistakes on your credit report? Each bureau is required to provide you with a free credit report every year. Take advantage of this feature and use it to check for mistakes, see where you are having credit problems and identify places where you can improve your credit.
Credit repair companies will tell you they can improve your credit score, and in some cases they can, but you can also do the same work yourself. Download a free copy of your credit reports and identify any bad marks that may be pulling down your credit score. You can dispute those marks with the credit bureaus for free, which is what the credit repair companies do. If the bureaus can’t verify the information within 30 days, they are required to remove the item from your report. Simple as that.
It may seem counter-intuitive, but the more credit you have, the better your credit score will be. The credit bureaus have a number of factors that determine your score; one of those is Credit Usage. This is a ratio that divides your total credit by the amount you owe. If you have a higher total credit limit, it brings the ratio number down, which can improve your credit score.