What Makes Up Your Credit Score

If you don’t have any idea what goes into your credit score, you can’t do much about it. If you know what elements go into coming up with it and how it is calculated makes it possible for you to have more control over your financial status.

1. The most significant part of your credit score will have your history of making payments as a basis. This accounts for 35% of your total credit score. Then, if you have an impeccable record of prompt payments, then this is actually good news. Nevertheless, if you always forget to pay a bill, then it would be otherwise.

2. Your blend of credit makes up 10% of your score. Having a mortgage, car loan, credit card and maybe a store account that you pay on is a sign to the agencies that you can handle different credit options. See to it that you can handle all of them, though, given that not paying on time on even one type can count against you.

3. 15% of your credit score will be determined depending on how long you have had a credit history. Certainly, the better you have handled that credit in the past years, the better it will be for your score. However, it would still be better to have a more established credit record than a shorter one.

4. Second in weight to your payment history will be the total amount of your debt. This factor makes up for 30% of your score. The debt you owe is compared to your income in what is called the “debt to income” ratio. The lower it is, the better. You must target keeping your total debt at 25% or less of your annual income to have the best effect on your rating.

5. New inquiries into your credit can be an indication that you may be overextending yourself and account for 10% of your total score. The one exception will be the case wherein you are the one looking at your credit report.

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