The Top Five Factors That Contribute to Your Credit Score
Whether you like it or not, playing the credit score game is sometimes necessary to get the things that you want in life. Even if you have enough money to make major purchases like a home or car, your credit score is actually a bigger factor than whether or not you can afford them. The good news is that even if your credit score isn’t high enough now, there are some things you can do to boost it up. In order to learn how to improve your credit score, you need to know which five factors contribute to that credit score the most.
Payment History – 35%
Making all your payments on time every month is the most important thing you can do to improve your credit score. The good news is that it’s easy to do as long as you have the money, but the bad news is that it takes time to build up your score by paying on time. Some ways to make sure you pay on time include automatic bill pay and/or using a detailed budget. If you think a payment may be late, contact your creditor to try to work out an arrangement. Over time your score will improve based on making on-time payments.
Credit Utilization – 30%
Your credit utilization ratio is defined as the amount of credit you’ve used vs. the amount you have available. That means that if you have a credit card with a limit of $5,000 and a balance of $500, you’re using 10% of your available credit on that particular account. The best way to increase your score in this area is to pay down your debts so you have more available credit. Another trick is to request an increase on your credit lines so that you have more available to you and can lower your utilization ratio. This means asking for more credit without actually using it.
Length of Credit History – 15%
Like your payment history, the best way to build up the length of your credit history is simply by playing the waiting game. You may not want to close your oldest credit account which is factored in as well as the average age of each of your accounts. Paying off the balance of a relatively new account and closing it can help your credit utilization and shouldn’t hurt, and may actually help, the average length of your credit history.
Credit Mix – 10%
Your credit mix score benefits from having a diverse mix of open accounts including credit cards, a mortgage, an auto loan, etc. Just be sure you don’t go crazy opening new accounts because this is only 10% of your credit score, and too many inquiries may hurt you (see next entry).
Inquiries – 10%
The amount of new accounts that have been opened, or applied for, in the last six to 12 months makes up 10% of your credit score. Avoid applying for too many new accounts in a short period of time. You can try asking for an increase on your line of credit on an existing credit card rather than opening a new one, for example.
GCS Credit Union is here to help you improve your credit score. We invite you to become a member and meet with one of our representatives who can help you with a customized solution. Just give us a call at (618) 797-7993 today to get started.