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Why your friend has a better credit score than you

Figure out the reasons for your low credit

Figure out the reasons for your low credit score and work to boost it. Credit: Getty Images/iStockphoto / zimmytws

If you’re new to credit, you might wonder: Why does your credit score pale in comparison to your friend’s, even though you checked it on the same website, using the same scoring model?

“For someone who has a low credit score, there is always — and I mean always — a logical explanation for why that score is the way it is,” says John Ulzheimer, a credit expert who formerly worked for credit-scoring company FICO and credit bureau Equifax. “It’s never random. It’s never anecdotal.”

These factors might be working more in your friend’s favor than in yours:

Record of on-time payments

You and your friend might be in the habit of paying bills on time, but even one forgotten payment can drag down a credit score.

Payment history is a key factor for both FICO and VantageScore Solutions, the two major credit-scoring companies in the United States. It accounts for 35 percent of your FICO score, and VantageScore characterizes it as “extremely influential.” Payments more than 30 days late are reported to the credit bureaus and, like other negative marks, can stay on your credit report for seven years.

Longer credit history

Your age, gender, sexual orientation, race, location and religion don’t affect your credit score. Having a high income won’t goose your score, either.

So what else counts? The length of your credit history, for starters. This makes up 15 percent of your FICO score and is “highly influential” for VantageScore.

Applying for new accounts can also ding your credit, but generally only a little. Maintaining a mix of accounts — for example, carrying both loans and credit cards — can help.

Improving your credit

To see what’s hurting your scores, pull your credit reports for free from AnnualCreditReport.com, a federally authorized website. Then take these steps:

  • Dispute inaccuracies. Report errors on your credit reports to the corresponding credit bureaus.
  • Pay down debt. In particular, reducing high balances on credit cards can boost credit significantly.
  • Piggyback. If your parents have excellent credit, ask them to add you as an authorized user on a credit card.
  • Open a credit card and use it responsibly. Start with a student card or a secured card, one that requires cash collateral. Those younger than 21 may need a co-signer.

Using a smaller percentage of your credit card’s available limit and paying down loans can boost your credit at FICO and VantageScore Solutions, the two major credit-scoring companies in the United States. The amount you owe accounts for 30 percent of your FICO score. For VantageScore, percentage of credit used is a “highly influential” factor, and total debt is “moderately influential.”

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