What Makes up Your Credit Score?

Whether you’re 18 or 80, you should know your credit score. However, more importantly, you should know what your credit score is based on ….

35% – Payment History. This is the largest portion of your credit score. If you are more than 30 days late, late pays, slow pays or no pays, all this does make a huge negative impact on your score.

30% – Amounts Owed. How much you owe does impact the amount you are able to borrow. If you have a lot of debt, this may show you are overextended financially. However, you can solve this by making sure you only charge up to half or less of your card limit on all your credit cards.

15% – Length of Credit History. Your credit track record actually speaks for itself and you. The longer you have had your credit and paid your bills on-time has a huge impact on your score. Something to consider before you cancel any credit cards is that once they are cancelled, so is all your history of that card. It is better not to use the card than to just cancel it.

10% – New Credit. Debt is not your enemy, in fact you need debt to have a credit score – even a good one; but it is better to have it spread between different types of loans than on just credit cards. You should have distributed between credit cards, car loans, student loans and the rest in a mortgage.

Purchasing a home is one of the most important decisions you can make in your life. However, the decisions you make before you decide on purchasing may make a difference if your credit score is good enough to secure a loan. If you would like to know where to start, contact me. We can talk about where to start, who  to talk to and how to move forward into your new home.