The first thing you need to know about your credit is that you have more than one credit score and they change all the time. Think of your FICO score as a snapshot of your entire credit picture. New information is constantly being added to your report and old information is being deleted. These changes can impact your credit score.
THERE ARE 5 PARTS TO THE FICO CREDIT SCORING SYSTEM
- Payment History Have you paid your credit accounts on time? Late payments, bankruptcies, and other negative items can hurt your credit score but a rock solid record of on-time payments helps your score. This makes up about 35% of your credit score.
- How Much You Owe FICO scores look at the amounts you owe on all your accounts, the number of accounts with balances and how much of your available credit you are using. The more you owe, the lower your scores will be. This makes up about 30% of your score.
- Length of Credit History A longer credit history will increase your score. However, you can get a high score with a shorter credit history if the rest of your credit report shows responsible credit management. This accounts for approximately 14% of your credit score.
- New Credit If you’ve opened new credit card accounts or added new loans in a short period of time, this factor is going to work against you. Too many recent inquiries could be a sign of financial distress and your credit scores might decline. New credit accounts for 10% of your FICO score.
- Other Factors These include the different types of credit you have. It’s a plus to have a mix of credit such as credit cards, a car loan and a student loan. Your ability to handle different types of debt makes up 10% of your credit score.
CREDIT TIPS
There are no shortcuts to getting out of debt. If a healthy financial portfolio is what you desire, if you know you deserve excellent credit or if you are simply tired of carrying the burden of bad debt, contact me today to get started.
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