Credit Scores Are Vital to Your Financial Health.
A credit score is a number that helps lenders and others predict how likely you are to make your credit payments on time. Each score is based on the information then in your credit report.
Have you ever wondered what makes up your FICO scores, and what it takes to improve your credit? Have you looked at your credit report lately, and can you read it? What can you do if you have a marginally bad credit score and you want to improve it? First, you have to understand what makes up your credit score, what’s on your credit report, and what kinds of accounts help you increase your credit score, as opposed to what makes your credit score bad.
The five basic elements that the credit score is comprised of are listed below. Take a look at it and follow the basic guidelines outlined to increase your credit score – keep your credit card balances under 30% of the available limit, get rid of your department store cards, don’t open new accounts, don’t get too many credit cards, etc.
35% – Payment History
- Number of accounts paid
- Number of negative public records
- Delinquent accounts, past due items, how long since any late payments
30% – Amounts You Owe (keep under 30% of limit per credit card)
- Types of accounts with balances
- Amounts owed vs. original balances
- Amounts owed vs. credit limits
- Number of zero balance accounts
15% – Length of Credit History (the longer the better)
- Total credit history length
- Length of time since accounts opened
- Time since last activity
10% – Types of Credit Used (many store and credit cards – bad)
- Types of accounts (installment vs. revolvong – mortgage, car, credit card, store cards)
- More credit cards lowers the score
10% – New Credit (bad)
- Number or accounts recently opened
- Number of recent credit inquiries
- Time since recent inquiries
Wed, Sep 23, 2009
Credit Basics