What's Dragging Down Your Credit Score?

There are several factors used to make up a consumer's credit rating, but do you know if your score is as high as it should -- or could -- be?  Are there items in your credit report that are dragging your score down?  If so, some credit problems can be fixed relatively easily.  But you need to know what to look for, and how to correct the problem.

Maybe the easiest way to boost your credit score is to order a copy of your credit report and review it closely. This will be helpful because some estimates show that as many as 80 percent of all credit reports contain at least one error, and these often can have a negative impact on your credit score. Usually, these entries are the result of a typographical error, such as an incorrectly spelled name or transposed digits in a Social Security number.

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By checking the document closely, you may be able to discover an inaccurate entry and dispute it with the credit agency that issued the report. If a borrower can provide proof the account has been added to their credit report in error, then it will be wiped from their record and they may receive a credit score boost.

However, there are other things that may be dragging down a credit score without a borrower realizing it. One of the biggest such instances is as simple as carrying a large balance. This accounts for a full 30 percent of a consumer's credit score, and is determined as a proportion of the amount borrowed versus the total of the limits on all their credit cards. This credit utilization ratio aspect of a score can be maxed out by keeping balances at around 30 percent of the total available limits, or less.

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Borrowers should also try to generally keep better tabs on all their bills to make sure they're always paid on time and in full. This is the single largest factor in determining a credit score -- at 35 percent of the total rating -- so a missed payment can take a significant toll on a borrower's rating.

Image: Stuart Chalmers, via Flickr