It’s a number that means a lot to those living in “first world” countries – their credit score. Almost inevitably the question gets asked, “how can I improve my credit score?” Other variants are “will doing X hurt/help my score?”, “what is MY credit score?”, etc.

Professionally, I focus on reviewing models that use credit report information to determine “riskiness” of potential customers from an insurability perspective, and believe me, there’s a lot of detail variation from model to model, but there are commonalities – and those commonalities carry over into scoring models for creditworthiness, as well. I’m not writing this to educate anyone on how to obtain their credit report or any individual score, I just want to promote some understanding of the concepts involved. Do your own research on those fronts, and don’t forget that you could probably get a hold of many “proprietary” scoring models through open records requests to your local state agencies …

The first thing to understand is that you DON’T have A credit score. More on this in a moment, but you also don’t even have A credit REPORT. There are THREE credit reporting agencies, and each commercial entity that deals with credit decides which of the three to report to. Granted, major national institutions will report to all three, but there are regional variations, and therefore possible inconsistencies in the reports. The more sophisticated scoring models will pull all three reports and merge the information, but not all models will do that.

Sometimes people ask about their FICO score (named after Fair Isaac Company). I reply with, “WHICH FICO score?” Fair Isaac is notorious for selling multiple competing scoring models, targeting every niche possible in any given market. Honestly, they have over a dozen different models filed in Texas to evaluate credit reports for purposes of underwriting personal lines insurance (depending on the marketing niche of the company and what lines and limits of insurance you request), so how many models do you think they they might have for evaluating your credit report for future creditworthiness? Given the hard-on that FICO has for tweaking models slightly to aim at different niches, it wouldn’t surprise me one bit to find a FICO model for creditworthiness on used car loans with no money down, used car loans with money down, new car loans over $30,000, new car loans under $30,000, etc. That’s the kind of thing that blows their skirts up.

FICO is just ONE vendor for credit scoring models. ChoicePoint is another, TransUnion is another, and there are various proprietary models owned and used by different companies. It’s a fair bet that at least half of the national lenders use their own scoring models to determine creditworthiness.

So a scoring model by ChoicePoint might view you a little differently than a model by Fair Isaac or TransUnion might. If you were to shop an automobile loan with multiple lenders who all used FICO models, you might find one lender uses a general FICO model for all auto loans, one lender uses a specific FICO model based on the loan type you request, and another lender uses a FICO model based on the loan type most typical of their customer base, regardless of what you requested.

If anyone tells you they can specifically improve your score by exactly X points (or more!) if you follow their advice, they’re bullshitting you. Theoretically it’s possible for you to “game” your credit score, if you know in advance what model will be used by your lender of choice. Unfortunately, that’s not gonna be the case, as we’ve reviewed above. So to have a statistical chance at improving your score (while not knowing WHICH score will be used), you need to understand the commonalities between the various scoring models.

Most credit-report based models focus on a handful of factors, and expand that handful into a dozen or so, or even dozenS, of different variables. The most common and heavily-weighted factors (and example variables) to most of the models I’ve reviewed are, in alphabetical order:

Balance to Limit – do you use all the credit available to you? Are any accounts extended? Believe or not, if you DON’T use credit AT ALL, it counts agin’ ya.

Credit-Seeking Behavior – have you been seeking new credit, or opening new lines recently? Consumer-initiated inquiries in the past however many months (typically 2 years, but some models treat very recent inquiries differently) are deleterious to your score. Most models account for duplicate purpose inquiries, like shopping a mortgage refi over a 30-day period.

Length of Credit History – age of the oldest account, average age of all accounts.

Number of Available Lines – some models treat you differently based on the thickness of your credit file, some models give bonus points for more accounts, up to a limit. Too many accounts, like a dozen or more, isn’t as good as having high single-digit accounts (but a dozen good accounts is still better than none or 1-2 accounts).

Quality of Payments – learn to love “paid as agreed.” Derogatory public judgments, collections, delinquencies are all bad things, sometimes really bad (just a moment on that one). Often medically-related collections and delinquencies are ignored in these models.

Total Amount of Debt – not so often used, but it’s there in some models. Having absolutely NO automobile finance debt (totally paid-off cars) is a negative in at least one model. I guess maybe most people who don’t have car notes are hitting hard times, and that’s why?

Type of Credit Used – FICO has a chubby for this category, but other models use it as well, just not typically with as much weight. Standard “upper-class” credit lines are better than lower-class credit lines, think national bank revolving credit cards are better than gas station or department store cards, conventional mortgages and automobile loans are better than finance company or credit union loans for the same purchases, “rent to own” and personal finance accounts are pretty much net negatives on your score.

Here are some quick general tips for improving your score, based on weighting factors I’ve seen in models I’ve reviewed.

Pay everything as agreed or better than agreed.

NEVER close old revolving credit accounts that are in good standing. NEVER EVER. Other than skipping payments, closing old revolving accounts is one of the WORST things you can do to your score, if you’ve got any length of history at all.

USE YOUR CREDIT for convenience purposes on a regular basis. Wiping the card every month will generally cost you nothing in finance charges (although the people you shop with will pay for it), but it gives you an account that is currently used and paid as agreed. If you can cut a check for that new car, consider financing it through the manufacturer’s credit facility and simply paying it off early, especially if you don’t currently have a car loan, and haven’t in years.

If you’re young, GET CREDIT NOW. It will pay off before you’re much older. If you don’t NEED credit now, and you don’t have very many accounts, consider getting another account NOW, while you DON’T need it. The inquiries and opening of a new account will gig your score for at least the next six months to two years, but after that, the extra account in good standing will outweigh the detriment of a new account being added.

STAY AWAY from “nonstandard” credit. You might get $50 now from the Home Despot, but opening that card is (1) a consumer-initiated inquiry, (2) a new line of credit, and (3) a retail account. Is it worth the $50? I don’t think so, because it very well might cost you at least that much in interest rate charges down the road.