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What Goes into Your Credit Score

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Credit scores are so important for major wants and needs in life, from buying a car to applying for a mortgage or a home refinance. Consumers should always practice responsible credit behavior to ensure their credit scores only get better and better. If you are wondering what goes into a credit score, or how your credit score is calculated, consider these key factors that work together to create your score.

Payment history – Be sure to pay your bills and debts on time to ensure good payment history. This is one of the biggest factors that create your FICO score.

Current debt – Your credit score also highly values the ratio of what you currently owe (overall) to the amount of money that you make.

Length of your credit history – Longer credit histories are better for consumers’ credit scores than shorter histories. It is good to get your college-aged children into practicing responsible credit behavior as soon as they are old enough.

Kind of debt – The type of debt that you carry also factors into your credit score. Mortgages and car loans are seen as more favorable kinds of debt than credit card debt and payday loans.

Credit inquiries – Every time you apply for a new line of credit, an inquiry is pulled on your credit score. Larger numbers of inquiries can negatively impact your credit score.

Not everyone starts out with great credit. If you are working to build better credit, know that changing your credit history takes time and you shouldn’t get discouraged if it doesn’t happen right away. Stick to your goals, keep spending and paying back responsibly, and you will finally see positive changes in your credit score.

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