Do you understand the 5 components of your credit score?

In the last half century or so, the amount and number of people using some form of personal credit has grown and increased significantly. Although credit reporting agencies freely publish how they calculate one’s score, many seem confused about what is and is necessary to protect and improve theirs! It is significant that the three major agencies use slightly different criteria and/or measures to calculate them, and therefore it is prudent to check your report against each of these at least once a week. year! (Note: By law, you are entitled to receive each of these once a year at no cost to you.) With that in mind, this article will briefly attempt to consider, examine, review, and discuss the top 5 components that affect your score.

1. Payment history: Your payment history contributes approximately 35% to the total scores! Even later, on some occasions, especially if it happened somewhat recently (generally considered up to and including 3 to 7 years ago). Some believe that if they never or rarely borrow, they will have a better rating, but agencies want a payment history to clearly show them that they can handle it responsibly. So it’s wise to have maybe 2-5 cards and maybe a car payment and pay them, on time, every time!

two. Amount due and usage: Is the total amount due considered adequate? Compared to your available lines of credit, how much do you have outstanding? Generally, you want to use 30% or less of what you have available! Remember, this category usually accounts for around 30% of the total calculation!

3. Length of credit history: The length of your personal credit history often determines about 15% of the total! Lenders typically look for some combination of these, and some with a longer term/age, to clearly demonstrate to them a pattern of responsible behavior in how you handle money.

Four. New credit: Every time you acquire new credit, it affects your overall score. If you have too much of this recent activity, it hurts your grade! Beware of becoming too attracted to any store offer, which could weaken your overall evaluation! This category represents about 10%.

5. Credit mix: One’s credit combination is often considered to be worth approximately 10% of the total assessment! If all one owes is on credit cards, etc., it is considered less convincing than if there is a combination, in type and duration, of what their total debt may be.

Become a smarter consumer and learn how to manage credit and debt more responsibly and protect your score! It’s important, but will you proceed consistently with the necessary degree of discipline and commitment?