Credit Score Components and Mythologies

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So if you pay all of your bills on time, you?ll have a great credit score, right?

Well, not exactly.

However, you do need to pay all of your bills on time. But that will only account for 35% of your score. The other 65% is still up for grabs.

If you are interested in credit repair,?there are professionals out there who will work towards improving your credit so that you can get approved for loans, receive lower interest rates (and save thousands of dollars), and more.?CreditRepair.com?will help you create a game plan to improve your credit score, they will contact credit companies directly on their own, they will communicate with the credit bureaus to work towards making a change, and they provide an online dashboard that will help you monitor everything that is going on. It is all very affordable and will most likely save you thousands in interest fees and late charges.

Credit Score Components and MythologiesOne thing to be sure of is not to max out your credit cards.

In fact, you need to keep your debt to available credit ratio around 20%, you can go up to 35% if absolutely necessary but the higher your debt ratio goes, the lower your score. In fact, the debt to available credit ratio accounts for another 30% of your score.

But you don?t have to carry a balance. In fact, you are better off financially if you don?t because of course you are not paying interest, fees etc. Of course, that is so long as the credit card company doesn?t cancel your card?which can happen.

Your credit history is also important. An older credit card or rather one that you have had for a while will count more than a brand-new one. The longer your accounts have been open the better. Credit history accounts for another 15%.

Side note: If you are looking to increase your credit score, you can start off by?checking your free credit score through Credit Sesame. They provide free credit scores so that you can see what areas you should be working on. Yes, it is actually free!

Recent credit counts too. New credit and inquiries count for 10%. If you have a lot of inquiries, it looks like you are shopping for credit, which of course, you are. But your credit score doesn?t like that. For every inquiry you get a ding. Limit them.

And the last 10% has to do with the type of credit that you have. Credit for things that really should be paid with cash, like clothes for instance, are damaging to your credit. Well, let’s be more specific there.

If you have a department store charge card and you buy clothes, it is detrimental to your score. However, if you buy clothes with your regular credit card, Visa, Mastercard, American Express, Discover it doesn?t hurt your score, provided of course, you follow the other rules like not maxing out your card.

Credit scores seem to be a mystery, but they are really not.

The most important thing is probably not your credit score but your financial stability. But if your financial stability is good it is likely that your credit score is too, or at least is on its way to being good.

 

Photo credit: LendingMemo.com

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