Here is what each component says about you:
Payment History details your track record of paying back your debts on time. This component encompasses your payments on credit cards, retail accounts, installment loans (such as automobile or student loans), finance company accounts and mortgages. Public records and reports detailing such items as bankruptcies, foreclosures, suits, liens, judgments and wage attachments also are considered. A history of prompt payments of at least the minimum amount due helps your score. Late or missed payments hurt your score.
Amounts Owed or Credit Utilization reveals how deeply in debt you are and contributes to determining if you can handle what you owe. If you have high outstanding balances or are nearly "maxed out" on your credit cards, your score will be negatively affected. A good rule of thumb is not to exceed 30% of the credit limit on a credit card. Paying down an installment loan is looked upon with favor. For example, if you borrowed $20,000 to buy a car and have paid back $5,000 of it on time, even though you still owe a considerable amount on the original loan, your payment pattern to date demonstrates responsible debt management, which favorably affects your credit score.
Length of Credit History refers to how long you have had and used credit. The longer your history of responsible credit management, the better your score will be because lenders have a better opportunity to see your repayment pattern. If you have paid on time, every time, then you will look particularly good in this area.
Type of Credit concerns the "mix" of credit you access, including credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. You do not have to have each type of account. Instead, this factor considers the various types of credit you have and whether you use that credit appropriately. For example, using a credit card to purchase a boat could hurt your score.
New Credit or Inquiries suggest that you have or are about to take on more debt. Opening many credit accounts in a short amount of time can be riskier, especially for people who do not have a long-established credit history. Each time you apply for a new line of credit, that application counts as an inquiry or a "hard" hit. When you rate shop for a mortgage or a car loan, there may be multiple inquiries. However, because you are looking for only one loan, inquiries of this sort in any 14-day period count as a single hard hit. By contrast, applying for numerous credit cards in a short period of time will count as multiple hard hits and potentially lower your score. "Soft" hits—including your personal request for your credit report, requests from lenders to make you "pre-approved" credit offers and those coming from employers -will not affect your score.
Payment History details your track record of paying back your debts on time. This component encompasses your payments on credit cards, retail accounts, installment loans (such as automobile or student loans), finance company accounts and mortgages. Public records and reports detailing such items as bankruptcies, foreclosures, suits, liens, judgments and wage attachments also are considered. A history of prompt payments of at least the minimum amount due helps your score. Late or missed payments hurt your score.
Amounts Owed or Credit Utilization reveals how deeply in debt you are and contributes to determining if you can handle what you owe. If you have high outstanding balances or are nearly "maxed out" on your credit cards, your score will be negatively affected. A good rule of thumb is not to exceed 30% of the credit limit on a credit card. Paying down an installment loan is looked upon with favor. For example, if you borrowed $20,000 to buy a car and have paid back $5,000 of it on time, even though you still owe a considerable amount on the original loan, your payment pattern to date demonstrates responsible debt management, which favorably affects your credit score.
Length of Credit History refers to how long you have had and used credit. The longer your history of responsible credit management, the better your score will be because lenders have a better opportunity to see your repayment pattern. If you have paid on time, every time, then you will look particularly good in this area.
Type of Credit concerns the "mix" of credit you access, including credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. You do not have to have each type of account. Instead, this factor considers the various types of credit you have and whether you use that credit appropriately. For example, using a credit card to purchase a boat could hurt your score.
New Credit or Inquiries suggest that you have or are about to take on more debt. Opening many credit accounts in a short amount of time can be riskier, especially for people who do not have a long-established credit history. Each time you apply for a new line of credit, that application counts as an inquiry or a "hard" hit. When you rate shop for a mortgage or a car loan, there may be multiple inquiries. However, because you are looking for only one loan, inquiries of this sort in any 14-day period count as a single hard hit. By contrast, applying for numerous credit cards in a short period of time will count as multiple hard hits and potentially lower your score. "Soft" hits—including your personal request for your credit report, requests from lenders to make you "pre-approved" credit offers and those coming from employers -will not affect your score.
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