Credit Score Calculation

• Three major consumer credit reporting bureaus---TransUnion, Equifax and Experian--collect and document credit information to determine a consumer's credit risk. A credit score is computed based on five components: payment history, utilization rate (i.e., the amount of credit available for purchases), types of credit, new credit and the length of credit history.
  
  

Credit Score Range

• A credit score can range from 300 to 850 points, with 300 being least favorable and 850 being the most favorable. Frequently, consumers with a consumer credit score of 720 and above qualify for lower interest rates on credit products and larger lines of credit.
  
  

Increasing a Credit Score

• The most effective way to increase a consumer credit score is to pay off existing debt to within 30 to 40 percent of the maximum credit limit, pay the minimum balance due on all credit accounts---including lines of credit, loans, mortgages and credit cards---on time and maintain older credit accounts. Closing an older credit account can cause a consumer credit score to drop.
  
  

Statute of Limitations

• Every state places a time limit on how long a creditor has to seek repayment of an outstanding debt. Statute of limitations laws vary, depending on the type of account and the state in which the account holder lives. For example, Florida law sets a four-year statute of limitations on open-ended accounts (i.e., credit cards). As a result, a consumer credit score is subject to change as the credit information reported on a consumer credit report changes. Changes to a consumer credit score are most common after the removal of a credit account due to statute of limitations.