The following is a quick break-down of what affects your credit score, along with a few suggestions on how to maintain a positive score.
If you are serious about raising your credit score, you will want to talk with a professional credit repair company like Lexington Law, or one of the others.
35% Is Payment History
A full 35 percent of your credit score is derived from your payment history. Considering this is such a large part of your credit score, it would be wise to pay extra attention to this portion of your credit score. Your payment history is effected by late payments, collection accounts, charge offs, judgements, liens, etc.
The recency and severity of your late payments and negative listings plays a big-roll in this portion of your credit score, too. For example, a 90 day late payment will probably hurt your credit score more than a 30 day late payment will.
How to maintain a positive payment history?
- Pay your bills on time
- Avoid Judgments and tax liens
- Work diligently to get ALL negative items removed from your credit reports!
- Become an authorized user on a family member’s card that has a positive payment history (Their positive history should list on your credit reports.)
30% Is Amount Owed
The second largest portion of your score is influenced by the amount you owe. This is worth taking a few minutes to keep your eye on. It is also one of the easier portions of your credit score to leverage in your favor.
Your amounts owed are exactly as it sounds…The amount of debt you have compared to the amount of credit extended to you. Essentially, the lower balance you have, the better for your score. If you have a credit card with a thousand dollar credit limit and your budget is at nine hundred dollars, your credit score translates that as irresponsible and lowers your score.
How best to maintain your Amounts Owed?
- Keep your credit balances below 30 percent of their balance…At least! Paying them down completely is the best if possible!
15% Is Length of Credit History
Your length of credit history can be a deal breaker when applying for a home or car, even though it only contributes about 15% to you credit score.
It is made up of how long accounts have been opened and when the last activity on a specific account was.
How to maintain a strong length of credit history?
- Open credit accounts early
- Become an authorized user on a family members’ card that has a positive payment history (Their positive history should list on your credit reports.)
- Pay your bills on time!
10% Is Based On New Credit
The smallest contributor to your credit scores, but still very important, is based on New Credit.
Your new credit portion is determined by how many times you apply for credit. The formula is simple – If you are constantly applying for credit your credit score will see this as a bad thing and start to take a dip.
How to build a strong new credit section of your credit score?
- Limit the amount of times you apply for credit each year
- Dispute and remove any inquiries that should not be on your credit reports.
10% Is Types of Credit in Use
The other small section of your credit score, but worth working on, is based on the types of credit in use. Remember, you can be denied a loan for as little as just five points – so everything counts.
This piece is made up of the different types of credit you have in use. For example, a thick file would have a few credit cards, a car loan, a mortgage etc etc where a thin file would only have credit cards, or only have a car loan.
How to keep your Types Of Credit In Use where it needs to be?
- Pull your credit reports and see where you are lacking (or where you are heavy)
- Do not open an account simply because you do not yet have one without speaking with a professional first.
If you’d like to find out more, in-depth, information on what makes up a FICO score you may want to check out MyFico.com.
Now is the time to take action and deal with your credit. A higher credit score is a few steps away. I hope this site is helpful in your journey towards better credit. Do not waste another day being a victim of poor credit. Life really is better with good credit.