Your Credit Score.
How it is calculated and tips to help improve it.
Approval for a loan or credit card
Even renting a home and employability
Your FICO credit score represents your ability to pay back debt. (and can affect your:)
Did you know?
Your FICO credit score represents your ability to pay back a debt.
Scores can range from 850 to 300
A higher score tends to show less risk to a lender when loaning money
While a lower score can show greater risk, and affect the terms of the credit agreement.
How is your score calculated?
35% Payment History
30% Amount of Debt Owed
15% Length of Credit History
10 % Recent Credit Activity
10% Type of Credit Being Used
Make payments on time!
Your Payment History (Shows your ability to make payments on time, number of payments missed, and how late they are compared to the due date.)
(There are some ways to help increase this part of your score) Make payments on time! Remember when payments are due Automate payments for bills to reduce the risk of missing them
(The best way to improve this part of your score is to) Reduce and pay off the balance of your loans and credit cards. (This will show lenders that you are able to pay back your debts and can overall help improve your score.)
Total Debt Owed (Is based on the amount of money you owe in loans and credit cards)
- A long history of credit with steady payments will result in a higher score. - Avoiding applying for credit can hurt your score in the long run if lenders have no credit history to review. (A word of advice, apply for credit early on, as long as you remember to pay off your balance and not accumulate debt.)
Length of Credit History (This category requires time when looking to improve your credit score, and factors in how long you have had credit.)
- Lenders view applying for and opening a lot of new accounts in a short amount of time as potential financial struggle. (Only open new accounts when you need them.) (To improve this factor of your score, do not open many accounts at once, be aware of any new accounts you do open, and remember to make timely payments or, if possible, pay off the balance.)
Recent Credit Activity (If you have recently applied for or opened many new accounts it can have a negative affect on your score.)
- The focus here is to see what experience you have with each type of account. - It is best to have a mix of accounts, but only open accounts that you need! - This is not usually a primary factor, but can be important if there is not much other information on your credit report.
Types of Credit Being Used (Lenders are looking at what types of accounts you have)
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