The 5 Ways YOUR Credit Score is Calculated…
Having tier 1 credit is invisible Money!
Please allow me to explain the 5 simple ways that your credit score is calculated, pull up a chair and get comfortable great information coming your way right now.
The current credit scoring system ranges from 300 points to 850 with 300 being very bad to 850 being excellent or Tier 1, after reading this article you will have information literally at your finger tips to make great decisions to put you on the path to Tier 1 credit status or as I like to call it
“The Holy Grail”. Possessing a great credit score does wonders for your self esteem not to mention your buying power.
- 35% of your score which accounts for the largest portion is based off your PAYMENT HISTORY!!! so rule number 1 pay your bills on time… I cannot stress this enough. Here’s the deal if you sit down and make an agreement and sign paperwork saying stating that you are going to pay. Please honor your end of the agreement. Late payments can drop your credit score significantly.
2. The next biggest portion is AMOUNTS OWED, which comes in at 30% there is a formula called debt to income ratio, if someone owes more than they have coming in they are out of ratio in the negative. Creditors like to see you and I with a surplus of income before they say yes in the form of an approval. for example when you pay of and obligation that has a $300 dollar a month commitment, you will have freed up $3,600 dollars. Cha Ching!!!
3. Up next is CREDIT HISTORY!!! this gem count is 15% of your total FICO score and it is almost like a report card of your credit history which types of credit one has and also how many credit cards or trade lines you have open. How much debt you are carrying as well as if you paying your bills on time.
4. NEW CREDIT 10% two of the smallest amounts in the FICO spectrum however, I feel this one has a very hard hitting impact, Why? because of credit inquiries. Tip get the loan approved through your preferred Bank or Credit Union first before you go Car shopping here’s why, each time they run your credit that is a direct hit to your score in the form of inquiries. Keep inquiries to no more than 2 per year!!! 1 is better…
5. And the last 10% is the CREDIT MIX This is Revolving and Installment lines of credit, to be more specific Installment credit is your Car Loan or Home loan aka Mortgage it’s the same amount each month. A Gas/Petrol and credit card are good examples of revolving because it changes each month due to the nature of you paying the on the card thereby reducing the balance and starting over fresh each month with a clean slate.
Ladies and Gentlemen, here you have the 5 ways your Credit Score is calculated. The sub title mentioned “Tier 1 credit is invisible money”, what do I mean by this? your great credit score will save you tons of Money in the form of lower interest rates, low or no down payments, finance charges, and access to better credit cards which can reward you with points! frequent flier miles! and other great perks. Knowing is half the battle!
