How Your Credit Score is Determined
35% Payment History
HOW OFTEN DO YOU PAY YOUR ACCOUNTS ON TIME?
Late payments could possible lead to a lower score.
30% Amounts Owed
HOW MUCH OF YOUR TOTAL CREDIT HAVE YOU USED?
Less is more! Lowering debt can be the key to a better credit score.
10% New Credit
HAVE YOU OPENED ANY NEW CREDIT LINES LATELY?
Opening several accounts in a short time can lower your credit score.
10% Types of Credit Used
DO YOU HAVE MORE THAN ONE LINE OF CREDIT?
Having experience with different types of credit can help your score.
15% Length of History
HOW LONG HAVE YOU HAD CREDIT HISTORY?
A longer history of responsible credit use will likely lead to a higher score.
TIPS FOR ESTABLISHING AND MAINTAINING HEALTHY CREDIT
- Borrow only what you can afford to repay.
- Make all of your payments on time.
- Avoid excessive requests or inquiries for credit
- Have an emergency account to pay for unexpected expenses
- Check your report annually to contest and remove any erroneous information
- Keep a high credit line and a low balance. Credit utilization ratios measure this relationship, and lower is better.
- Do not open new store credit cards just to save on a purchase. New accounts can lower your score, and too many payments can be difficult to manage. Saving 10% on a $300 lawn mower means little if it costs you even just fractionally more on a $300,000 home loan.
- Do not open new accounts just to transfer balances for an introductory rate. In addition to possibly lowering your score, these offers often have traps. Instead, use them to leverage a lower rate from your existing card company.
- Do not close old accounts. If you have a good record of payments on old accounts, these will benefit your score. Using them occasionally and conservatively will keep them active and contribute toward a good score.
- Do not be afraid to use credit. Without the use of credit, you will have no score, and that can be just as bad as a low one.
- Maintain a variety of accounts. A combination of revolving, installment and secured financing along with a good record of payments will yield a higher score.