Knowing what your credit score is made up of can benefit you in many ways. Less than 15% of consumers know their credit score before they go to make a major purchase.
A good credit score can help in saving thousands of dollars in interest rates and fees. The difficulty that most consumers face is in knowing how to maintain their good credit. It is best to always keep an eye on your debt-to-income ratio and not take on excessive credit card debt. These two factors will weigh heavily on one’s good credit score.
Credit Score Explained
A credit score is a measurement of your behavior, and is frequently referred to as a FICO score. The score ranges from 300 to 850 – the higher the score the better.
There are five related criteria that make up your credit score:
Debt-To-Income Ratio (30%)
Lenders want to know the ratio between your available credit and debt, and what your total balances are. Your score is affected more negatively as you get closer to the maximum allowed on your accounts.
Length of Credit History (15%)
You receive more points towards your score the greater the length of time that your accounts have been open and active. This provides lenders a track record of your behavior.
Payment History (35%)
Your payment history takes into account on time bill pay, accounts referred to collections, bankruptcy, past-due accounts, etc. This gives lenders a gauge to assess what type of risk you will be.
Number and Types of Accounts (10%)
Having a range of account types from revolving and installment lines shows that you have experience in handling multiple accounts. This helps to how a reduced risk when a lender is looking at your credit score.
Credit Inquiries (10%)
How often your credit score has been pulled over a 12-month period can affect your score in a negative manner if to frequent.
A lender wants to feel secure that they are providing money to a safe risk. Remember that a credit score is based around your financial behavior.
Our Debt Relief and Settlement Service
Although we do not offer credit counseling we feel it is our responsibility to provide you as much information as possible so to help you make the best debt relief decision possible. If you feel that credit counseling is not right for you, take this opportunity to find out more on how our debt relief program can reduce your overall monthly out-of-pocket expenses, save you thousands of dollars, get you debt free in as little as 24-48 months. Click here for a service overview.
