Understanding Your Credit Score

Do you know the impact that your credit score can have on your life in so many ways? It can affect your ability to get a job or rent an apartment, the rate you pay for insurance and the ability to receive a loan and the cost you pay for borrowing money. For example, when financing a $20,000 car loan for 60 months, a person with D credit will pay approximately $130 more for their monthly payment and $8,000 more for interest over the length of the loan. Learn what a credit score consists of here.

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What actions can hurt my score?

  • Missing payments, regardless of amounts

  • Credit cards at capacity (maxing out credit cards) over 50% of available balanced used will lower your score

  • Opening up numerous credit card accounts in a short time

  • Having more revolving debt in relation to installment debt

  • Closing our credit cards (this decreases capacity)

What makes up my score?

  • 35% Credit History (including on time payments and delinquencies)

  • 30% Capacity (maxed our credit cards can lower your score)

  • 15% Length of Credit (opening date of oldest line and average opened date of all other lines)

  • 10% Accumulation of Debt (including number of inquiries and opening dates)

  • 10% Mix of Credit (installment credit can raise your score and revolving credit can lower your score)

What does not affect my score?

  • Debt ratios (total debt divided by total assets)

  • Income

  • Length of residence

  • Length of employment

How to Improve My Score:

  • Pay off or pay down your credit cards

  • Do not close credit cards because capacity may decrease

  • Move your revolving debt into installment debt

  • Continue making payments on time (older late pays will become less significant with time)

  • Slow down on opening new accounts

  • Aquire solid credit history with years of experience

Your credit score is like your financial report card grade. Scores can range from 301 to 850. Above 730 is an A+ and below 600 is a D. Building good credit is one of the most important things that you can do for your future. What you pay to borrow money will depend on your credit score. The higher your score the more easily you will qualify for a loan and the less interest you will pay. An A+ credit score will save you $1,000s on a car loan and $10,000s on a mortgage.