CREDIT 101 – HOW DOES CREDIT WORK?
Confused by your credit report? Review the five areas below that affect your credit report/score and the tips to bring your score up.
Confused by your credit report? Review the five areas below that affect your credit report/score and the tips to bring your score up.
Component that Affects Your Credit Score | Percentage of Your Score |
How to Improve It |
Payment history |
35% | This includes payment information, adverse public records, the severity of your delinquency, the number of past due items and the payment amount agreed upon. Bottom line? Pay your bills on time. |
Credit available on revolving debt |
30% | Check your credit balances and the percentage of credit used on each type. Keep the ratio low. |
Length of credit history |
15% | The longer you have been building credit and the less you use your credit, the better. Start now if you haven’t already. |
New credit |
10% | Monitor your credit report for recent account opening and credit inquiries. The longer time period since your last new account or inquiry, the better. |
Types of credit used |
10% | Watch out for how many credit accounts you have open. |
• Missing payments (regardless of $ amounts … It takes about 24 months to restore credit of one late pay)
• Credit cards at capacity (i.e. maxing out credit cards)
• Closing credit cards out ( this lowers available capacity and the eliminates the history)
• Shopping for credit excessively
• Opening up numerous trades in a short time period
• Having more revolving loans in relation to installment loans
• Borrowing from finance companies
• Transferring Balances
• Debt ratio
• Income
• Length of residence
• Length of employment
• Criminal Record or Personal Information
• Pay down on credit cards
• Do not close credit cards because capacity will decrease
• Continue to make payments on time (older late pays will become less significant with time)
• Slow down on opening new accounts
• Acquire a solid credit history with years of experience
• Obtaining additional credit at preferred rates
• Better insurance rates
• Employment opportunities
• 40% = current to 12 months
• 30% = 13-24 months
• 20% = 25 – 36 months
• 10% = 37+ months
Get Credit – a 12 month program that allows you to build your credit score and your savings all at once. You pick the amount to save, and we’ll get you set up for success.
Learn more about what kind of credit mistakes you can dispute here.