5 Factors That Actually Matter to Your Credit Score
My main goal is to educate my clients so that they can work on KEEPING their credit score up when they are done with our Credit Repair Program. Today, I wanted to share with you the 5 things that matter to your credit score. The more familiar you become with what factors into your score the easier it will be to start improving your credit habits!
What Matter to Your Credit Score?
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35% Payment History
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30% Capacity and Amount Owed
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15% Length of Credit
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10% New Credit
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10% Types of Credit Used
Payment History – 35%
This is the MOST IMPORTANT aspect of scoring. Your payment history for each account is shown and broken down into different labels. A single late payment can affect your score anywhere from 60 to 110 points. The later the payment the more it hurts your score. Late payments stay on your report for 7 years, but they only affect the score for under 2. Missed credit card payments affect your score less than a missed auto or home loan payment.
Capacity and Amount Owed – 30%
You always want to keep a low balance on each of your credit card accounts. Its better to spread out your borrowing between multiple cards so that no balance goes over 30% of your credit line. Always remember someone with a $500 credit limit and only using $125 looks much better than someone with a $5K limit using $3K of it.
Length of Credit – 15%
Always keep your credit accounts open even if you don’t use the cards. If you feel you want to get rid of the card cut it up and forget about it but, the long term account will benefit your credit score. Having short term credit is good too if you are making your payments on time. It helps the bureaus know how long you have been using credit and what your usual length of an account is.
New Credit – 10%
Do not open too many Credit accounts at one time. It gives the impression that you might be doing a lot of big spending in the near future. When you apply for credit that is a hard inquiry on your credit report. This will knock points off of your score temporarily with each hard inquiry.
Types of Credit Used – 10%
Mixing up credit types makes a good balance in your credit portfolio. You want to have some credit card accounts and some kind of installment loan like a car or a mortgage if possible. This only effect the score slightly so don’t open different kinds of accounts to help create variety when they are not needed especially because new accounts and hard inquiries do negatively effect your score even temporarily.
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