After troubles, how can I fix my credit score?

This was originally published on Monday, September 16, 2013, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question: I recently went through some very tough financial troubles that ruined my credit score. I worked very hard to get out of it, but how can I start improving my score?

Answer: Many of us are feeling the rise of inflation and cost of living. Unfortunately, many of us find ourselves in some serious financial troubles including foreclosures and bankruptcy. It is important to remember that you are not rebuilding your credit score but rebuilding credit history and worthiness.

Before you can repair your credit score, it is important to understand how your score is calculated.

Your credit score, also known as your FICO score, is a tool used to measure how reliable you are in repaying your debts.

There are three credit bureaus and usually they have three different scores. That is because each company uses your information differently. Do not assume that the three bureaus have the same information, not every credit issuer reports to every bureau.

There are five major factors that go into calculating your score.

• Payment history. This is about 35 percent of your score. This factor will show lenders the accounts you had or currently have along with how well you meet your payment deadlines and/or how many days you are past due or have missed. This category also will show if your accounts have been turned over to a collection agency or if you have filed for bankruptcy.

• Current amount owed. This will factor for about 30 percent of your credit score. Recorded in this area are how many accounts you have such as credit cards, loans or in-store credit cards and your balance on each account. High balances or large amount of debt from many sources will lower your score. Also, having a lot of credit with no debt could also have an adverse effect on your score. Usually small debts that are paid off in full will raise your score.

• Length of credit history. This will calculate for about 15 percent of your score. This section concentrates on how long you have maintained credit. For most creditors, time equals stability. Having a credit card but not using it can hurt more than carrying a balance on many different accounts and paying them off on time.

• Types of credit used. This will count towards 10 percent of your score. Being more varied in the types of accounts you use will increase your score. A person who carries only one credit card may have a lower score than a person who shows that they can responsibly manage more than one account.

• New credit inquires. This accounts for the last 10 percent of your score. There are two types of inquires that can be made.

A soft inquiry can be from a financial institution or potential creditor just wanting to look at your score, your perspective employer, or from you viewing your credit history. Soft inquires do not affect your score.

Hard inquires come from a financial institution that you have applied for a line of credit or loan. The more hard inquires you get, the lower your score becomes. Usually, if someone has opened a lot of accounts in a short time period, it may suggest potential financial troubles.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at and read past columns at the Money Matters blog at


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