What’s Your Credit Score?
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Is it better to have more or fewer credit cards? M&J reveal the five factors that determine your credit score and what you can do to get your number higher.
1. WHAT ARE THE 5 CATEGORIES THAT MAKE UP YOUR CREDIT SCORE?
Understanding how your credit score is calculated is the best place to start when looking to boost your credit score. There are five factors that make up your score. The first one we can talk about is YOUR PAYMENT HISTORY. This tracks how consistently you made your monthly payments on outstanding loans. It accounts for 35% of your credit score. That’s important because potential creditors are going to look at probability that you will pay loan back on time. So if you have a bad payment history it sends up red flags. Consumers also need to realize that creditors will be looking not just at the due date but the time of the day that it’s due. And people assume it’s going to be on the same day every month, its not so consumers need to watch the actual due date.
DEKO: What makes up your credit score:
payment history — 35%2. WHAT’S THE SECOND CATEGORY?
The second category is your current debt level. This calculates your total outstanding debt and divides your income. This accounts for 30% of your credit score. This is important because it shows your ability to maintain a good debt to income ratio. If you have $1000 worth of credit and you have used $900 of that then you have a 90% debt ratio. Would a creditor want to give you money if you don’t have the money to pay this? They want to see what you are using your credit for. They are looking at if you are floating your life on your cards or if you pay it off and only use credit in emergency or for a big-ticket item.
DEKO: What makes up your credit score:
your current debt level — 30%3. WHAT’S THE THIRD CATEGORY?
How Long You’ve Had Credit accounts for 15% of your credit score. Creditors are going to analyze the length of time that has passed between when you established credit up to the present time. It’s really about how long you’ve had experience with credit and how you’ve been using it. The belief is the longer you’ve had it, the better you are at managing it. The thinking is the longer you’ve had credit the higher the likelihood of you’ll be responsible.
DEKO: What makes up your credit score:
how long you’ve had credit — 15%4. WHAT’S THE FOURTH CATEGORY?
How Often You Apply For Credit counts for 10% of your credit score. This means that how often you are shopping for credit could come into play for your credit score. If you shopping to have multiple credit cards than you could be accruing more debt. So it will be looked at negatively if you have tried to get multiple cards within one 30 day cycle
DEKO: What makes up your credit score:
how often you apply for your credit — 10%5. AND THE FINAL CATEGORY?
Types of Credit your “credit mix” make up the final 10%. Your credit mix is important because your mix is made up largely of what cards you have in your wallet. Basically here’s the breakdown. You should have no more than 2-3 major cards (VISA, MASTERCARD), 1-2 charge cards (that you pay off Monthly, AMEX) and also in the mix, what kind of secured loans do you have? We’re talking about home loans or car loans.
DEKO: What makes up your credit score:
credit mix — 10%
