Factors and Strategies to Improve Your Credit Score

May 18, 2016 | By Steven DiGregorio

actors affecting credit scores

Factors Affecting Your Credit Score

Credit can be confusing, but understanding the factors that affect your credit score will help you to better manage your finances. Here are the most critical factors affecting your credit score:

  • Your payment history on all loans and credit card accounts for a little over a third (35%) of your overall credit score.
  • Approximately a third (30%) of your score is based on the total amount of debt you owe.
  • The number of recent, open credit lines accounts for about ten percent (10%) of your credit score.

Any new loans, or new lines of credit will increase your overall debt load and therefore will initially lower your credit score. As long as you maintain timely payments, your credit score will bounce back up. Your overall credit history has considerably more impact on your credit score than a single new loan.

Strategies to Improve Your Credit Score

These strategies will help to improve your options in securing the best financing necessary for your situation and help improve your credit rating:

  1. First, keep your credit-debt ratio as low as possible on all of your cards – below 50% is a must, but below 30% would be best. This will improve your income to debt ratio by increasing your available credit compared to how much debt you can carry.
  2. Find a low-interest card and keep it. The cards that you keep and use with the longest history of regular payments with will help your credit rating high. Also, don’t hesitate to contact your credit card company and inquire about a lower interest rate.
  3. Pay off and cancel cards with high interest rates, or cards that you have had disputes with or a history of poor payments.

All of these strategies work up to a point, there is a threshold based on the number of cards and loans you have open that will impact your credit rating internally with creditors. Consolidating and eliminating debt is simply the best way to improve your overall credit rating.

Strategies to reduce debt include negotiating interest rates with the credit card company, or making extra payments, or payments above the minimum monthly payment, to reduce interest charges and loan lengths. Consider transferring balances from one credit card to another with a lower rate as well as consolidating student loans, to help save on interest.


Please note that the content of this blog does not constitute tax advice and is only intended for the educational purpose of the reader.  Please consult your tax advisor for specifics regarding your circumstances.

For more information contact us at 845.563.0537 or Contact@CompassAMG.com

Steven M DiGregorio is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC a Federally Registered Investment Advisory Firm.  Securities offered through an affiliated company Spire Securities, LLC a Registered Broker/Dealer and member FINRA/SIPC.


About Compass Asset Management Group

Our boutique-style firm has an investment philosophy is both prudent and value driven. We combine research from the largest firms on Wall Street with three decades of market experience to provide strategic, tactical and dynamic investment management.  Compass Asset Management Group, LLC delivers personalized financial planning, estate planning and investment management advice in a private setting with a high degree of sensitivity to your concerns and objectives. Our goal is to exceed yours expectations by listening closely, understanding deeply and communicating well through frequent, personal consultations entirely focused on your financial goals.

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Beattie, A. (January 8, 2016). How Credit Cards Affect Your Credit Rating. Investopedia.
Dierking, D. Are personal loans bad for your credit score? Retrieved on February 25, 2016 from http://www.investopedia.com/ask/answers/111615/are-personal-loans-bad-your-credit-score.asp#ixzz41C0MCnLC. Investopedia.
When Paying Off Debt With Your 401(k) Makes Sense retrieved on Feburary 25, 2016 from http://www.investopedia.com/video/play/when-paying-debt-your-401k-makes-sense/#ixzz41BxtYuIK. Investopedia.
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Tags: credit cards, credit report, credit score, debt, debt reduction, interest rate

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STEVEN M DIGREGORIO is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC.
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