Credit score
One of your most important assets is your FICO score – it is often the challenging factor while securing various forms of credit like a loan or credit card. In order to determine your borrowing ability, factors like job history, assets, and income are being sought after by your credit providers. In order to extend your credit, about 75% of your chances is influenced by these factors.
Maintaining a good shape in terms of credit is a must in today’s financial crisis; your credit score may be maximized when you’re skillful to play this game of credit. How? You may try and improve your credit by yourself; alternatively, you may seek the guidance of credit repair companies. The game of credit repair is dynamic, and hence it becomes all the more necessary for you to follow the five primary rules. Let’s go through these rules in details:
Payment history – 35 percent of your credit score. This includes payments concerning your latest activities that are reflected in your payments history. In comparison to your earlier negative payment history, your latest negative payment history causes more loss of points. Your latest payment history catches more attention of the creditors over a period of time than your older late payments.
Key to maximize score: Your bill has to be paid within 30 days from your due date.
Utilization rate – 30 percent of your score. This is determined as a percentage of unused credit that you may utilize depending on your credit limit. You’ll accumulate points once you utilize a credit limit lower than 30 percent from your revolving accounts; once more than 30% of your limit gets exceeded you tend to lose points.
Key to maximize score: Don’t exceed 30 percent of your limit; know your credit balances well. Get in touch with the card issuer and request him to increase the limit when you’ve exceeded 30 percent of your limit. Your utilization rate can be reduced in this way. This is the key to repair credit.
Length of history – 15 percent of your credit score. This is the duration for which your accounts are bound to remain open. With time the age of your account is supposed to move up and down. Till the time your repayment history concerning a new debt is generated, the entire score and age gets lowered after a new account is opened. The same holds good when your credit is negatively influenced due to the closure of an old account. For the initial 12 months points are likely to be subtracted for the new accounts; these accounts stay neutral for another 12 months and add points only after you’ve continued timely payments for 24 months.
Key to maximize score: Achieving a zero balance on your old credit card account doesn’t necessitate a closure of that account till the time your lender charges an yearly fee. Your credit score is largely influenced by your oldest accounts; your score might be reduced when you close them down. It is in your own interest that you have a credit cushion to rest on during this economic downturn. Your credit card must add valuable points to your credit score, and to ensure that you must use it once after a period of six months. Make sure you have enough strength to pay back your debt on the following month.
Type of credit – 10 percent of your credit score. Types of credit that you have may vary in nature; these include revolving credit and installment loans. In order to earn a higher credit score it is necessary for you to earn both. You should always maintain a minimum of three credit cards (revolving accounts), one auto loan (with additional installment) and a major installment loan to enhance your chances of gaining the highest score.
Your credit score will be negatively influenced when you don’t have any accounts that are currently active or when you have only a few accounts. Your efficiency and willingness of managing your debts are reflected by way of a good mix of various types of credit. You must also remember that your credit score is not really affected by your debit or ATM cards.
Step to maximize score: All your accounts need to be active and open. Once your mortgage is paid off, you may opt for a HELOC (home equity line of credit) that could be used for occasional expenses which you’ll pay off during the coming month. You must have a minimum of three credit cards that can be paid off every month even during retirement.
Inquiries – 10% of your score. Hard and soft are the two categories under which these inquiries are depicted. A soft inquiry is registered when your prospective employer takes your permission and pulls the credit report. Such a pull doesn’t have any hard influence on your credit score.
Likewise, when a lender pulls the credit report it is registered as a hard inquiry. Your credit score is gets affected in a number of ways when a hard inquiry is registered. For instance, when your credit report is pulled by various lenders for each account, an accumulation of all soft inquiries is assumed as a hard inquiry. On the contrary, when various accounts are associated with their respective pulls then each such instance will be taken up as a hard inquiry. These hard inquiries can have a negative influence on the credit score.
Step to maximize credit score: Your credit score often gets affected by a number of credit activities in the long run; under such circumstances, staying power gets a bit different. Your credit report reflects all paid off judgments, collections and debts for a period of seven years; on the other hand, bankruptcy stays for about 10 years in your credit report. It is for a period of 12 months that your credit score is affected by these inquiries although they’re shown in your report for two years. In the event a borrowing transaction is anticipated or when it’s absolutely necessary, you must remember to share your personal information to avoid maximum influence on your credit score.