In the last half century or so, the number and number of people using some form of personal credit has grown and increased significantly. Although credit reporting agencies freely post how they calculate one’s score, many seem to be confused about what is needed and necessary to protect and improve theirs! It is significant that the three main agencies use slightly different criteria and/or measures to calculate them and therefore it is prudent to check your report against each of these at least once a week. year! (Note: By law, you are entitled to receive each of these, once a year, at no cost to you.) With that in mind, this article will attempt to briefly consider, examine, review, and discuss the top 5 components that affect your score.
one. Payment history: Your payment history contributes approximately 35% to total scores! Even, being later, on some occasions, especially, if that happened, something recently (generally, considered, up to, and including, 3 to 7 years, ago). Some believe that never or rarely borrowing will score better, but agencies want a payment history to clearly show them they can handle it responsibly. So it’s wise to have maybe 2-5 cards and maybe a car payment, and pay them, on time, every time!
2. Amount Owed and Utilization: Is the total amount owed considered adequate? Compared to your available lines of credit, how much do you have outstanding? Generally, you are looking to use 30% or less of what you have available! Remember, this category usually makes up about 30% of the total calculation!
3. Length of credit history: The length of your personal credit history often determines about 15% of the total! Lenders typically look for some combination of these, and some with a longer term/age, to clearly demonstrate to them a pattern of responsible behavior in how you handle money.
Four. New credit: Every time you acquire new credit, it affects your overall score. If you have too much of this recent activity, it hurts your grade! Beware of becoming too attracted to any store offer, which could weaken your overall rating! This category represents about 10%.
5. Credit mix: One’s credit combination is often considered to be worth approximately 10% of the total assessment! If all one owes is in credit cards, etc., it is considered less compelling than if there is a combination, in type and duration, of what their total debt may be.
Become a smarter consumer and learn to manage credit and debt more responsibly and protect your score! It’s important, but will you consistently proceed with the necessary degree of discipline and commitment?