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What affects your credit score – and how to raise it

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When it comes your credit score, although this may sound obvious, the first thing you need to do is know what is yours. Once you’ve taken that first step, you should understand more about the key factors that make up your credit score and what you can do to improve it.

According to folks Fair Isaac Corp., San Jose, California, which provides the most commonly used credit score, FICO, five important things count towards your credit score, but these two are the most important.

Payment history: Have you missed any payments or made late payments on your credit account? This is one of the leading factors, with FICO giving a weighting of 35%. The more severe, recent and frequent the late payments, the greater the impact on your score reduction.

On the other hand, if you have a long history of consistently making payments on time across all types of credit accounts, your score will be higher because this is exactly the type of behavior lenders look for.

Amount of available credit used: Do you consistently use your credit card to the max but still manage to make all your payments on time? If so, don’t think this is helpful for your credit score – it’s not. If you’re on the limit of a number of revolving credit cards and you have more than three cards with a balance, it’s a sign to potential lenders that you’re at high risk for expanding your usage. its credit.

This factor accounts for 30% of your credit score. If you want to boost your score, use your revolving credit under 10 percent of the total available, have less than three cards with a balance, and get your total balance under $3,000.

The other three factors that make up your score – the length of your credit history, recently opened credit accounts, and a combination of different account types – make up the remaining 35 percent of your credit score. .

Your credit report also includes your name, address, Social Security number, date of birth, and employment information, but this information is not considered in your score. Marital status, gender, and race are also not factors.

Some newer credit scores, such as FICO Score 9, do not bother you if you have already paid off your third-party collection account. It also treats unpaid medical collections less harshly than other types of unpaid collections. But it affects your rent payment history, if they are reported.

What separates people with high credit scores from the rest? Those with the highest scores, known as FICO High Achievers, have the following characteristics in common:

  • About 96 percent have no missed payments.
  • About 99 percent have no collections listed on their credit report.
  • They must not disclose the public record – bankruptcy, foreclosure, litigation, salary attachments, compensation, judgments, etc. – listed on their credit report.
  • Their average revolving credit usage is less than 6%.
  • On average, there are three accounts with balances.
  • They owe a total of less than $3,000 on all credit cards.
  • The average age of a credit account is 11 years or more, and the age of the oldest account is 25 years.
  • They opened their latest credit account about 2.5 years ago.
  • Less than 35 percent of them applied for new credit once or more in the past year.

So if you want to raise your score, do what High Achievers do. And as you progress and improve your credit behavior, your credit score will gradually increase.

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Teja
Teja
I am passionate about journalism and using new technology to spread news. I am also interested in politics and economics, and I am always looking for ways to make a difference in the world. I am the CEO of Janaseva News, and I am 24 years old.

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