***Last Updated October 29th, 2007***

Before I start, let’s see what a credit score is composed of:

As everyone should know by now, Annual Credit Report gives out free, yearly credit reports and credit scores for $7.95 using Equifax, TransUnion, and Experian. Well, I guess I used up Equifax and TransUnion sometime in November last year so I have to wait another week or so to get my credit reports from them. However, I was able to get my report from Experian and they provided me with all kind of information such as how many credit cards I have opened and closed, my payment history for each card, my other loans and debt (none), a pretty graph, and more.

Well, I didn’t pay for the real credit score. Instead, Experian told me that my PLUS score, Experian’s own credit score system, is 724 out of from 330 to 830. This isn’t too bad, but I do not like how I’m only above 50.1% of the U.S. credit active population since I thought I had a better score.

What exactly is a PLUS score? Is it trustworthy and comparable to a regular credit score? Experian explains:

Credit scores
[T]he various scoring models have been fairly well standardized so that credit bureau scores, including your PLUS Score developed by Experian, use similar information and are roughly comparable.

PLUS Score
A credit score developed by Experian, calculated based on information contained in an individual credit file PLUS Score can range from 330 to 830, with a higher score indicating lower credit risk. The formula used to calculate your PLUS Score is based on the most current consumer information available, using a similar formula to those used by lenders.

The information in your credit files at the different credit bureaus may vary, which means that your scores may be different for each bureau, including your PLUS Score.

With the credit report from Experian, they also told me factors for what affects my score and how it affects it. Here are my factors - positive and negative:

Positive

• I’ve paid my bills on time and currently do not have any overdue accounts or derogatory information, such as a collection, charge-off, or bankruptcy, on my report.
• I have a good cushion available credit betwen my current balance and my credit limit on all open trades. This cushion shows lenders that I am unlikely to overextend myself financially.
• I have no open installments loans, such as auto loans, on my credit report.
• I have at least 2 or more open major credit cards, such as VISA, MasterCard, American Express or Discover, on my credit report. This often tells lenders that I am a responsible borrower and they may be more likely to see me as a good credit risk and extend my credit.

Negative

• On average, many of my accounts have been open less than three years. Having long term credit accounts that I consistently pay on time is an important indicator of stability to lenders. Over time, my score should improve as my credit history ages.
• My overall balances are close to my overall credit limits, which may be lowering my score. Having high credit limits shows lenders that I am responsible with my credit, but I should try to increase the cushion between my total debt and my limits. Paying down my balances may be viewed favorable by lenders and may help improve my credit score.

All of these reasons are completely true. I have had opened two credit cards for some free deals just to close them off. I didn’t know about its effect until later on. My cushion between my balance and limit is good for my BofA and Citi but my AmEx isn’t so good. Both of my negatives can and already have been fixed. I know the report isn’t actually reporting the most up-to-date information because my credit lines for couple of my cards were increased recently, but it wasn’t showing up on the report.