What Makes Up Your Credit Scores?

Understanding your credit score

Your credit score is a three-digit number that can range from 300 to 850. Most scores range from 600 to 700. A higher credit score increases your chances of getting approved for a loan and obtaining a lower interest rate. Each credit bureau has their own systems that reflects your ability to repay your debts, each with their own nuances.

Excellent [ Above 720 ]
Good [ 680 – 720 ]
Fair [ 620 – 679 ]
Poor [ 580 – 619 ]
Very Poor [ Less than 580 ]

 

Payment History – 35%
On time payments with little or no late payments will be sure to help you keep your scores high.

Credit Usage – 30%
Balances of less than 50% of each existing line are in your best interest. Going above 50% is very detrimental to your scores.

Length of time since credit line has been opened – 15%
The longer the credit, the better it is. You build strong credit the longer you have your good payment history.

Inquiries into your credit – 10%
The more inquiries you have, the lower the score. It is like a picture in time so when you have inquiries, it shows you may be increasing your debts.

Number of Credit Cards – 10%
You want your income to support your lifestyle.

 

There are a number of common fallacies that you need to know about:

Cancel the credit cards you don’t use:
Credit is based on history so keep the oldest credit cards if possible.

Paying off collections improve your scores: 
Credit is based on length of time, so when you pay off a collection, you start from a new point in time.

Past credit problems will always be a problem.
The impact of old credit fades in time as new credit replaces it.

If you had a bankruptcy, you can’t get a mortgage.
Not True! Some loans can be done the day after a bankruptcy.