How Your Credit Is Calculated
Types Of Credit In Use
Generally speaking, 10% of your credit score is factored by the types of credit debt you have on your record. If you have large amounts of loans from financial companies this could hit your score as a negative factor. Although not a large percentage but sometimes that 10% is what you need to qualify for an important purchase.
Recent Credit Checks
If you have had your credit examined numerous times recently you might see a drop in score. Approximately 10% of your credit score is determined based on new debt you have taken on. Provided you want to apply for a new loan for an important purchase. Our recommendation would be to not have your credit checked by other institutions that have nothing to do with the purchase you want to apply for.
Your length of credit history is a larger factor when determining a credit score. The longer your accounts are open the more positive that will affect the credit score. Around 15% of your credit score is based on the length you have obtained credit. The key here is to keep your accounts with one institution and show you are reliable and trustworthy.
Debt To Income
Debt to income is a ratio that compares the amount of debt a person has to the gross income a person earns. Lenders use your debt to income to measure if you can manage your finances appropriately. Even more than ever is this factor coming into play. Our recommendation is to pay down as much as debt as possible so that your ratio qualifies.
Nearly 35% of your credit score is based on your payment history. Obviously, a huge factor when determining your score. That being said a bad history of payments to financial institutions can negatively affect your score. Late payments are a killer so we suggest you stay on top of your payment dates and set up auto pay if possible. We all get busy and sometimes neglect our due dates but it is imperative you make paying your debt on time a priority. Even if you have to hire someone to pay your bills on time for you we believe it is well worth the investment.