Understanding Credit Scores

The highest credit score is 850, which allows for the best interest rates and lower monthly payments.

What Makes Up the Credit Score?

  • 35%=Payment history
  • 30%=Available credit on revolving accounts (capacity)
  • 15%=Length of credit
  • 10%=Accumulation of debt
  • 10%=Mix of credit

What Type of Actions Lower the Credit Score?

  • Late or missing payments
  • Using the entire amount of available credit on credit cards
  • Closing credit cards out (which decreases capacity)
  • Excessively applying for credit
  • Opening numerous accounts in a short period of time
  • Having more revolving loans in relation to installment loans

What Does Not Affect the Credit Score?

  • Debt ratio
  • Income
  • Length of residence
  • Length of employment

Approximate Credit Weight for Each Year:

  • 40%=Current to 12 months
  • 30%=13-24 months
  • 20%=25-36 months
  • 10%=37+months

How To Improve the Credit Score:

  • Lower credit card balances
  • Do not close credit cards (which decreases capacity)
  • Make payments on time
  • Do not open numerous new credit card accounts
  • Acquire a solid credit history with years of experience
  • Move revolving debt into installment debt