Credit Score

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Credit bureaus usually use five main factors in determining credit score, each one calculated or weighted differently.

Payment History-35%
Credit Utilization-30%
Length of Credit History-15%
Credit Mix-10%
New Credit-10%

Your payment history being #1, it is imperative that you always make your payments on time.

With credit utilization being #2, you should always try to keep your credit use at or below 30% of your total credit available. You can calculate your credit utilization by dividing the total of all your balances on credit cards by your total of all their credit limits. If you’re using greater than 30% of your available credit, it will decrease your credit score. You can improve this rating two ways. Either by 1)paying down or paying off your credit cards, or 2)by raising your credit limits.

Review your credit report and “credit score” on a regular basis. Typically higher credit scores can  save you $1,000s on mortgages, car loans, car insurance rates, personal loans, and credit cards.

Protect Your Credit always! Your credit score is used for more than just loan applications and credit cards. Your credit score affects a lot more (mentioned above). Protecting it is always alot easier than repairing it. You can get your free monthly credit score in many ways today including smartphone apps. These apps may also be able to send you alerts from when new accounts are opened, to any score changes, helping protect you from identity theft.

Pay all your bills on time, all the time! As you can see above, payment history carries the most weight in determining your score. With today’s online access, set up recurring payments so you’re never late. Even if it’s the minimum payment.

You should never cancel any credit cards either. Cancelling a credit card will most likely cause your credit score to drop. It will remove the line of credit attached to your account, which could negatively impact your credit utilization (see above). As mentioned above, your credit utilization is around 30% of your overall score, second only to your payment history.

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