They say age is nothing but a number, but what about your credit score? The problem most people have is that they don’t consider their credit score on a regular basis. In fact, most people don’t consider their credit score at all – ever – until it’s time to go out and buy something that requires a loan. All of a sudden they realize just how important that little number really is in the grand scheme of life. Read on to find out 15 things you might not know about your credit score.
You know you need to pay on time, but did you know that your payment history only accounts for approximately 35 percent of your total credit score? Late payments aren’t good, defaulted payments are worse and accounts in collection are really bad; but somehow these still only account for 35 percent of your score.
Surprise! Your perfect payment history and lack of applications isn’t going to give you a perfect score if you owe more than 30 percent of your credit limit. What does this mean? Well, if you have a credit card with a $1,000 limit and you continuously carry a balance of more than $300, it looks bad on your report.
At least when it comes to your credit score. Your credit’s age is a factor. In fact, it’s a 15 percent factor. This is why it’s important you don’t go closing all your old accounts. You need some of them to establish credit history.
Approximately 10 percent of your credit score is determined by the types of credit you have. The best scores have a mixture of installment loans such as cars and mortgages as well as credit card loans.
It’s nearly impossible to get a perfect 850 credit score, but as long as you are close to 800, you’re considered one of the most credit worthy individuals by lenders.
Most people typically fall between 600 and 750 when it comes to their credit score. A score of more than 700 is considered a good score, and anything less than that is considered fair, but not bad. Scores of less than 600 are considered bad.
If your credit is in need of repair, it can take a long time. It’s not something that can happen overnight the way in which you damage your score, unfortunately.
Only 13 percent of the world has a credit score of higher than 800. That’s a pretty small percentage of people with truly excellent credit scores.
You might think that you can avoid bad credit by not using credit, but not using credit doesn’t help you build good credit. You need to use your credit responsibly to build a good credit score.
Credit experts recommend that you have between 3 and 6 open credit accounts in good standing at all times for the best possible results raising your credit score or maintaining good credit. Never close an account as you will lose that credit history. Instead, just pay off the account and stop using it.
One or two open loans at a time is a good way to help you improve your credit score, provided you pay them on time every month.
Be careful applying for that store card to get the free tee shirt or mug, even if you don’t plan on ever using the card. The more applications you apply for, the lower your credit score drops. Inquiries can drop your score anywhere from 3 to 5 points at a time.
What you need to know about paying on time is that even a payment that’s one day late can have a negative impact on your credit report. If you happen to be late on a credit card payment, call customer service immediately and tell them that you accidentally forgot to make the payment. Make the payment over the phone and ask that they don’t penalize you. Some credit card companies will not report this to the credit bureaus assuming this is your first time missing a payment.
People with the best credit scores always pay more than the minimum amount due on their credit cards. In fact, most people pay their cards in full each month, though others pay significantly more than the minimum even if it’s not the full balance.
Check to see when you creditors report to the bureaus. For example, if you want to raise your score and your credit card company reports on the 15th of each month, make sure you pay off that balance on the 14th or sooner otherwise it looks like you’re carrying a balance each month, even if your due date isn’t until the 20th.