So what if my score is 600, 700 or 800, right?
As long as you NEVER buy anything on credit, get loans or car insurance; then it probably won’t worry you. But if you think you might want to buy a house, car or get a credit card then your score is very important. It will determine how much money you pay every month.

The difference in score for buying a house can save you between hundreds to thousands of dollars a year. This is the same for leasing/buying a car or getting a decent interest rate on a credit card. So what affects your score? What causes it to go down and up?

percentage.JPGAbout 35% affects Payment History: Any lates; collections; charge offs; bankruptcies; judgments; liens or the like will hurt the score. All of this is time based, the older the information the less it is contributing to the scores. Usually the first 2 most recent years is what is hurting the credit scores the most.
Example: A 5 year old collection will affect the score less then a 30 day late just a month ago

About 30% affects Utilization: It is best to have several accounts with low balances distributed then it is to have fewer accounts maxed out. To figure utilization: This is by far the fastest means for increasing the over all credit score.
Example: 2,000 used credits, with a total limit of 5,000 is a 40% utilization is better than 750 used credits on two cards that have a limit of 1350 which is also a high utilization of 55%

About 15% affects Established History: The longer you maintain open accounts with creditors the better. When first starting out of course this is not easy; but this is where getting added as an Authorized User to another persons established credit comes in best. Also need to check with the creditor to insure that they have a policy to report authorized user accounts to all 3 major credit reporting agencies.

And if you are thinking of closing an account, don’t. Just cut up the card and don’t get another one. Of course if you pay an annual/monthly fee, you will have to decide if it is worth it to you. You may be able to call and get them to waive the monthly fee for a while.

About 10% affects Inquiries & New Credit Rule: Don’t apply for credit unless you know you can get it or that you need to get it; unnecessary credit inquiries are going to hurt the scores – especially if your over all credit file is small to begin with.

About 10% affects Mix of Credit: Use different types of credit (revolving; installment; auto; mortgage…) evenly. Average recommended revolving accounts is no more then 3 or 4 credit cards, if you know you have too many, then maybe it is best to open up an installment loan to consolidate.

Note: Balance Transfers: These are great, but don’t look good on the credit reports; because lenders are going to see this and most likely affect their approval, if they think you are an over nighter; just passing through until a better rate comes along.