In the last, half – century, or so, the amount of, and number of people, using some sort of personal credit, has significantly, grown and increased! Although, credit reporting agencies, freely, publish, how the calculate, one’s score, many appear to be, confused about, what is needed, and necessary, to protect, and improve, yours! It is significant, the three, major agencies, use, slightly different criteria, and/ or, measures, to calculate these, and, therefore, it is wise, to check your report, with, each of these, at least, once per year! (Note: By law, you are entitled to receive, once a year, each of these, at no cost, to you). With, that in mind, this article will attempt to, briefly, consider, examine, review, and discuss, the 5 principal components, which impact your score.
1. Payment history: Your payment history contributes, approximately, 35%, to the total scores! Even, being later, on a few occasions, especially, if that occurred, somewhat – recently (usually, considered, up to, and including, 3 to 7 years, back). Some believe, if they never, or, very rarely borrow, they will have a better rating, but, agencies want a payment history, in order to clearly, demonstrate, to them, you can handle it, in a responsible manner! It is wise, therefore, to have, perhaps, 2 to 5 cards, and, perhaps, a car payment, and pay them off, promptly, all the time!
2. Amount owed and utilization: Is the total amount, owed, considered appropriate? Compared to, available, lines of credit, how much to do you, have, outstanding? Generally, using, 30% or less, than you have available, is sought! Remember, this category, generally, accounts for about 30% of the total calculation!
3. Length of credit history: The length of your personal credit history, often, determines, approximately, 15% of the total! Lenders, usually, seek some combination of these, and some, with a longer – term/ age, to clearly, demonstrate, to them, a pattern of responsible behavior, regarding, how you handle money!
4. New credit: Every time, one acquires new credit, it impacts your overall score. If you have too much, of this recent activity, it harms your rating! Beware of, becoming, too attracted to, some store offering, which, might weaken, your overall evaluation! This category accounts for about 10%.
5. Credit mix: One’s mix of credit, is often, considered, to be, worth, approximately, 10% of the total evaluation! If, everything, one owes, is on charge cards, etc, it is considered, less compelling, than if there is a mixture, in the type, and length, of what your overall debt, may be!
Become a smarter consumer, and learn, to handle credit, and debt, more responsibly, and protect your score! It’s important, but will you, consistently, proceed with, the necessary degree of discipline and commitment?