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Mark Cappel
UpdatedDec 23, 2008

How can I now get a start to get a better credit rating?

Hi, i have had a overdraft taken off my account, i have been unable to pay my loan amount so it has been taken over by Westcote debt recovery and as a result my credit rating it poor. My overdraft has now been fully paid and i am still paying my loan. I have a credit card with capitalone and use it regularly and have not missed a payment. How can i now get a start to get better credit rating? Thank you, Jon.

In order to build a positive credit history, and thus establish and maintain a good credit score, you must open, use, and timely pay credit accounts that regularly report to the three major credit bureaus (Equifax, Experian, and TransUnion).

Accounts that should help you build your credit rating by reporting positive payment information to the credit bureaus include auto loans, home mortgages, credit cards, and personal loans. A person with no credit accounts, like the friend you describe in your question, would have neither a negative nor a positive credit history; rather, he would have no established credit history (frequently called a "thin-file" consumer), which would make lenders hesitant to loan him money as they would have no information to judge his credit risk. From a lender’s point of view, having no credit is similar to having bad credit, as lenders generally do not want to lend money to someone who has no past history of paying his creditors on time.

Thankfully for consumers with no established credit, it is generally much easier for them to establish a good credit history than consumers with past credit problems. Consumers with negative credit listings, such delinquent accounts, must establish new positive credit lines to try to counterbalance the negative impact of their delinquent items. However, consumers with no established credit history do not have any negative listings weighing down their credit score, so opening credit accounts and making their payments timely should build a positive in a relatively short amount of time. And the longer they make their payments on time, the more their credit ratings should improve.

As you are inquiring about credit scores let me give you some information on how it is calculated. It is important to understand how your credit score is calculated. Your credit rating is calculated based on several variables, including:

1) Payment history, which counts for approximately 35% of your score, is the most heavily weighted factor used in calculating your credit score. Consistently paying your bills on time has a positive influence on your score, while late or missed payments will hurt you in this area. If you have delinquent payments, the older the delinquency the less the negative impact on your score will be. Collection accounts and bankruptcy filings are also taken into consideration when analyzing your payment history.

2) Total debt and total available credit, which counts for about 30%. This section looks at how much debt you have compared to the total available credit on your accounts. If all of your accounts are maxed out, you will be considered a poor credit risk, because it appears that you are struggling to pay off the debt you have already incurred. If your account balances are relatively low compared to your available credit, this part of the risk analysis should help your overall credit score. The score calculation also looks at these two factors independently. Having too much available credit, whether you have used it or not, could hurt your credit score, as statistical studies have shown that people with excessive amounts of available credit are a higher credit risk. Unfortunately, the bureaus do not define exactly what they consider excessive, so best tip is to use credit conservatively and to keep your debt to credit limit ratio low.

3) Length of positive credit history, which counts for about 15%. The longer you maintain accounts in good standing, the better your score will be. This shows that you are able to make a long-term commitment to a creditor and are consistently responsible about making your payments.

4) Mix of types of credit, which counts for approximately 10%. Having several different types of credit, such a credit cards, consumer loans, and secured debt, will have a positive influence on your credit score. Having too much of one type of credit can have a negative impact.

5) The number of new credit applications you have recently completed, which accounts for about 10% of your score. Applying for too much new credit in a short time period makes indicates that you could be credit risk, as you may be desperately trying to keep your head above water. The models make an exception for people who are shopping around for a loan, so if you are simply applying to see who can give you the best rate on a new loan, you need not worry too much about damaging your credit score.

If you would like to learn more about credit reports, credit scoring, and what it means to you, I encourage you to explore the wealth of material offered by at

I hope this information helps you Find. Learn. Save.