Do you understand the 5 components of your credit score?
In the last half century or so, the number and number of people who use some type of personal credit has grown and increased significantly! Although credit reporting agencies freely publish how they calculate your score, many seem 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 with each of these at least once a day. year! (Note: by law, you are entitled to receive, once a year, each of these, at no cost to you). With this in mind, this article will briefly attempt to consider, examine, review, and discuss the 5 main components that impact your score.
1. Payment history: Your payment history contributes approximately 35% to the total scores! Even being later, sometimes, especially, if that happened, something – recently (generally, considered, up to and including, 3 to 7 years ago). Some believe that if they never or very rarely borrow, they will score better, but agencies want a payment history to clearly show them that you can handle it responsibly. So it is wise to have maybe 2 to 5 cards and maybe a car payment, and pay them right away, all the time!
2. Amount owed and utilization: Is the total amount owed appropriate? Compared to available lines of credit, how much do you have outstanding? Generally, you want to use, 30% or less, of what you have available! Remember, this category generally represents about 30% of the total calculation.
3. Length of credit history: The length of your personal credit history often makes up about 15% of the total! Lenders generally look for a combination of these, and some with a longer tenure / term, to clearly demonstrate a pattern of responsible behavior in how you handle money.
Four. New credit: Every time you acquire a new loan, it affects your overall score. If you have too much of this recent activity, it hurts your grade! Beware of the store offer, too attracted to it, which could weaken your overall evaluation! This category represents about 10%.
5. Credit mix: One’s credit mix is often considered to be worth about 10% of the total evaluation. If all one owes is on credit cards, etc., it is considered less convincing than if there is a mix, in type and duration, of what your total debt may be.
Become a smarter consumer and learn to manage credit and debt more responsibly and protect your score! It is important, but will you consistently continue with the necessary degree of discipline and commitment?