Maintaining a high credit score requires finding the right balance between credit and debt. Having lines of credit, such as credit cards, is a way to establish credit. Various factors determine a credit score. Raising a credit score involves more than just making timely payments. Depending on how it is managed, the line of credit has a positive or negative affect on a credit score.
Payment History
Most creditors report customer information to credit bureaus on a monthly basis. Payment history impacts a credit score the most, accounting for 35 percent of a total credit score. Bills paid on time will have a positive affect on a credit score. If payments are consistently late, the credit score will drop.
Credit Utilization
Credit utilization accounts for 30 percent of a credit score. Credit utilization is the balance compared to the total amount of available credit. A line of credit that has reached the limit can drag down a credit score. Ideally, lines of credit should carry low balances and high credit limits. People should pay balances in full each month to increase their credit score.
Length of Credit History
An established account typically has a more positive effect on a credit score than a newer account. The length of time an account is open is 15 percent of a credit score. A person can raise her credit score by keeping her oldest accounts in good standing. Maintaining a lengthy history with a credit account shows lenders the customer's ability to meet her financial commitments.
Type of Credit
Consumers often do not realize the importance of having a mix of credit lines. This type of credit is 10 percent of a credit score. People should aim for a combination of credit that includes credit cards, installment loans and secured debt.
Credit Inquiries
Applying for too many credit cards can lower a score. Credit inquiries account for 10 percent of a credit score. Applications for credit initiated by the consumer are considered "hard pull" inquiries. When a person obtain's her own credit report, it is classified as a "soft pull" inquiry, which does not lower the credit score. Consumers are encouraged to monitor their credit report annually.
0 comments:
Post a Comment