A credit score, also known as a FICO Score, is a rating of your personal creditworthiness based on a system developed by Fair Isaac. A high score range is 720 to 850. There are five factors involved in achieving a high credit score.
Payment History
Fair Isaac's credit scoring model dedicates 35 percent of your score to payment history. Including on-time payments, late payments and slow payments (payment received after the due date but before the grace period ends). For high score, payments should be made before the due date.
Amounts Owed
A full 30 percent of your score is how much you owe. The more a consumer owes against his credit, the less credit worthy he becomes because of his debt-to-income (DTI) ratio. Your DTI is calculated by dividing your credit and loan debts into your gross monthly income. For a high score, keep your DTI under 30 percent.
Length of Credit History
The amount of time that you have held any credit lines counts for 15 percent. Some credit experts state that if you close your oldest account, you are shortening your credit history. However, each account is reported for seven years since the date of last activity and account closure is considered account activity.
New Accounts
New credit makes up 10 percent of your score and is only related to new accounts that are opened.
Types of Credit
Types of credit make up 10 percent and are secured or collateral loans and unsecured loans such as a mortgage or car loan for the former and credit cards for the latter.
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