Your credit scores, also commonly known as FICO scores, are a numerical grade of your credit performance and profile. Many consumers fail to realize how important their credit scores are until they have applied for credit and find out that their scores are too low for consideration or for the best loan terms. Only then do they realize the importance and the need to learn how to improve credit scores.

Why Are Creditors So Focused On Credit Scores? The algorithms and formulas used to derive your credit scores are very complex and take into consideration vast amounts of credit information. Not only does it consider your payment history, but it also evaluates the way you utilize and manage your credit. Creditors used to manually review an applicant’s credit report and other references, which was a labor-intensive and time-consuming endeavor. When faced with thousands of potential applicants, creditors would be easily backlogged if they had to manually review each applicant’s credit history.

Now the credit score comes along and it packages all that analysis into just one number. The creditor can spend less time and have fewer employees reviewing credit applications to make a credit determination. Creditors generally set guidelines on the minimum credit score they would accept from an applicant. They even take it a step further and use an analysis called risk-based pricing to tier the rates based on the applicant’s credit score. Credit scores are now the main driver in credit reviews, and it’s in the consumer’s best interest to learn how to improve credit scores.

Are Consumers Left In The Dark About Credit Score Requirements? Creditors do not generally publish their minimum credit score requirements or indicate what score is needed for the best rates. That is why it is so important for consumers to learn how to improve credit scores. Having a high credit score improves the consumer’s chances for the best rates and will save them money in the long run.

So what can a consumer do to learn ways to improve credit scores? They must first realize that credit scores are not a fixed number, as they can go up as well as down. Credit score improvement occurs when a consumer takes the necessary actions to make their credit profile more appealing to credit scoring programs. This goes beyond paying your bills on time, so once you understand how your credit is being evaluated, you can then manage your debts in a manner that may improve your credit scores.

You can start by obtaining your credit report and credit scores from all three credit bureaus (Equifax, Experian, and TransUnion). Take inventory of your debts and compare it to what is being reported on your credit report for accuracy. If you feel that your credit scores need improving, then you can seek ways to improve credit scores in an effort to better your scores.