Good news! Understanding your credit score is pretty easy, and you can use this knowledge to help you fix your score and keep you healthy.
35 percent of your score is linked to your payment history. If you haven’t had a consistent payment history so far, don’t panic. Part of the repair process begins with contacting creditors and bureaus to obtain inaccurate, misleading, and out-of-date information from your report forever.
If your payments are not up to date, catch up and stay up to date. Creditors will often work with you to create a payment plan so that you can keep up with your payments. Making payments on time should be your number one priority. It is the easiest way to influence your credit score.
30 percent of your score is your credit utilization. Your credit utilization rate is extremely important and you want it to be less than 30 percent. What does that mean? Here is an example.
You have three credit cards. Each card has a limit of $ 1,000. If you don’t consider other open credit accounts, you have $ 3,000 in credit available to you. $ 900 is 30 percent of your available credit of $ 3,000. At any given time, you should not collect more than $ 900 in total from the three accounts combined.
Add up your credit accounts, then add how much you owe on those accounts. If it exceeds 30 percent, pay off the balances as soon as you can. You will see an improvement in your credit score.
Bonus tip: don’t let your credit card balance carry over from month to month. If you can’t pay off a balance in a month, don’t spend the money unless it’s an absolute emergency. This will keep your credit utilization below 30 percent and will immediately help your credit score.
15 percent of your score is the length of your credit history. How long have you been borrowing? If your credit history is well established, you are considered less risky than someone who has just started borrowing. You are more reliable if you have successfully shown that you can pay back the money you borrowed
10 percent of your score is factored into new accounts and credit applications. A newer credit account is considered riskier than an older credit account because it has not established a payment history. The same applies for a new credit application. If you apply for more credit, you must borrow more cash on your monthly income; This tells creditors that you are spending more than you are earning.
10 percent of your score is your credit mix. Having a good credit mix is a good way to build good credit. A car loan, a mortgage, and a credit card are a good combination of credit.
