Breaking Down and Understanding Your Credit Score

Knowing about your credit is important for a ton of different reasons. If you are unaware that you have bad credit, you may go to sign on the dotted line to get that new car you want, yet ultimately learn that the only way you can drive it away is if you agree to an insane interest rate. Knowing your credit score is important because if you know it, you can monitor it. It’s important that in addition to knowing your credit score, you also know what makes up your credit score so you can attempt to raise your score if it’s too low. Check out the list of things that make up your credit report, and pay extra attention to areas that may be dragging down your credit score.

More than half of people in the United States have a credit score of above 700. A score above 720 is considered great credit and people with credit scores above that are “low-risk borrowers” in the eyes of the lenders. You shouldn’t have trouble getting an easyonlinepaydayloan with a credit score like that. If your credit score is above 700, you typically don’t really need to worry about improving it. If it is below 700 however, you should try to raise it.

Your credit score is made up of the following:

Payment History-35 percent

Your payment history is basically the history of the payments you’ve made to your different creditors. If you’ve always made your payments on time and in full, then the majority of your credit score will reflect just that. Even missing just one payment could hurt your credit score, and since payment history makes up such a large chunk of your credit score it’s important to always pay your bills on time.knowing-credit-score

Amount Owed- 30 percent

The next biggest chunk that makes up your credit score is the amount you owe your creditors. If you have multiple maxed out credit cards and are in a lot of debt, then this area of your credit score will reflect that. If your credit cards aren’t maxed out but you still owe some money, your credit won’t necessarily be hurt dramatically; try to pay off your bills in full each month to make sure this area of your credit score stays good.

Credit History-15 percent

Credit history is as simple as having a verifiable history of credit. In most cases, having a longer credit history will increase your credit score, granted you’re in good standing with your creditors. Credit history also includes things like how long it’s been since you’ve used certain accounts, and the average age of all of your accounts.

New Credit-10 percent 

Opening a lot of credit accounts in a short period of time means you’re at a larger risk for a bad credit score in the short term, especially if you don’t have a long credit history. Be wary when opening new credit accounts, and only open the ones you absolutely need to.

Types of Credit-10 Percent 

All of your credit cards, loans, retail accounts, and other forms of credit are consolidated into this category. It’s good to have different types of credit as it can increase a credit score, but having too much credit will hurt your score.

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