Fix Your Finances 3.0: Calculating Your Credit Score 

INDIANAPOLIS, Ind.- Many Americans are obsessed with their credit, and their credit scores. But what exactly makes your score go up or down?

The biggest piece of the pie is essentially whether or not you pay your bills on time.

“If we had to vote—and say why should someone have a good or bad credit score, I think we’d all agree paying your bills on time yea you should have a good score,” said Peter Dunn, a local financial expert.

Your outstanding debt is also considered, along with your credit history.

“New credit is considered bad, older credit is considered good,” said Dunn.

Something else that’s good for your credit is having different types of open credit lines.

“Credit card, an auto loan, home equity loan, mortgage, store credit card—that’s considered good because you have diversified credit,” said Dunn.

But what helps your credit score may hurt your bottom line as you pay off all that debt.

“That’s not good! This is where this whole thing is mystical—we all know that’s not good,” said Dunn.

If you’re looking to increase your credit, the easiest way to do that is by paying your bills on time for at least six months.

Doing that will boost your score by about 50 points!

Also, if you have negative marks on your credit report like bankruptcy or a bill that ended up with a collection agency, you must get those removed from your report in order for your credit score to recover.

Most negative entries on your credit report are supposed to fall off automatically 7-10 years after being added, however it’s important that you follow-up and make sure that actually happens.