What Really Affects Your Credit Score?
Your credit score comes from information found within your credit report. It is important to remember that any credit that you apply for will affect, and be affected by your credit score. Companies that provide credit, report your history to repositories and that provides a snapshot for determining your credit grading. The question most people have is what goes into that score?
- 35% Payment History
- 30% Amount Owed
- 10% New Credit
- 15% Length of Credit
- 10% Type of Credit
Payment History
Do you make your payments and do you make them on time? Credit agencies report late payments that exceed 30 days past the payment due date. Your score is affected by how late payments are, 30 days, 60 days, 90 days? How long ago were these late payments? How many late payments have you had?
Amount Owed
Credit scoring takes into consideration your credit utilization, and on revolving debt like credit cards, your balance to limit is a big part of our score. If you are at your credit limit, your score will be adversely affected. In addition, how much total debt do you have on your credit report, and how many accounts do you have with outstanding balances. Paying down your balances is always wise when looking to improve your credit score.
New Credit
How long have you had credit, how many new accounts are reporting on your credit report? These questions make up 10% of your overall credit score. Credit inquiries is an added factor in this portion of your credit score as well.
Length of Credit
The third most influential category is the length of time you have actively had open lines of credit. What are the oldest and newest lines of credit on your credit report? What is the average age of all accounts combined? Time is on your side in this sense, the longer that you have maintained good credit lines, the better.
Type of Credit
Managing a variety of accounts can be an asset to your score. Credit cards, installment loans and mortgages all make up your credit mix. If you don't have revolving credit for instance, opening a new credit card could benefit your score.
As with anything, continued information and education are essential to improving and maintaining an excellent credit score. Please contact one of our professionals with any credit related questions that you may have.
