3 IMPORTANT THINGS THAT AFFECT YOUR CREDIT SCORE

1. 3 IMPORTANT THINGS THAT AFFECT YOUR CREDIT SCORE Most people are very aware that they need to protect their credit scores but many people are unaware of how financial institutions arrive at the credit score. Banks, mortgage lenders and other loan providers consider three main factors when arriving at the credit score which can determine whether or not you get approved for a loan. Most lenders use a Fair, Isaac and Company (FICO) score which can range from a low of 300 to a high of 850 to determine if they can give you the money that you desire. Therefore, you need to know the three main factors and take steps to improve them when possible. LENGTH OF CREDIT HISTORY The 850 number is reserved for a few select borrowers that have had perfect credit for more than 30 years. While you may not even have been born 30 years ago, there are still things that you can do to improve this aspect of your score. First, keep accounts open as the longer the account has been open, the better your score. That does not mean that you need to use the card, just do not take steps to close the account. Secondly, the FICO score takes into account the number of months or years that you have had each card. Closed accounts that were paid on time remain on credit reports for 10 years from the date of closure. Those accounts with delinquent payments remain on your credit score for seven years. Leaving cards open that you have faithfully paid helps to build a good FICO score. AMOUNTS OWED The amount that you owe on a loan impacts your FICO score. Ideally, you will want to keep the amount owed at around 30 percent at any point during the month. If you have a card with a $1,000 limit, then you should never borrow more than $300 on that card. The worse thing that you can do is carry a large amount on your cards from month to month. It can also ding your score slightly if you pay off the entire amount each month.

2. PAYMENT HISTORY Almost 35 percent of your FICO score is figured on your payment history. Therefore, it is important to pay your bills on time when a payment is due. If you know that you are going to be late on a payment, then contact the creditor to work out an arrangement. Creditors are often willing to work with you by changing due dates to more convenient times or allowing you to skip a payment and pay more the next month. c Building good credit takes time. There are steps that you can take to help your credit score to rise even if you are just starting out. First, think carefully before you open a new account as the longer accounts are open, the better your score will look to creditors. Secondly, maintain a balance of 30 percent on your cards. Finally, pay your accounts on time or make arrangements with your creditors. When you do these things, you will find that your score raises over time.