Let me start off by saying that understanding how the three major credit bureaus arrive at your credit score is one of the most powerful pieces of knowledge you can have. Most likely this is not something that you have ever been taught. In fact, when it comes to your credit scores, the three major credit bureaus, Equifax, Experian, and Transunion, run sort of a "black box" operation.
To explain what makes up your credit score in as simple terms possible, this is how it works
Payment History: 35%
Payment history makes up the largest piece of your credit scoring model. It reflects how timely you make payments to your creditors.
Credit Utilization 30%:
The percentage of available credit used. Keeping your account balances below 50% of the available credit limit will maximize your scores. For the purpose of this article, this is where we will find the most room to quickly increase your scores.
Credit History - 15%
Your credit history reflects how long your credit has been open. Older accounts receive more positive weight than newer accounts.
Recent Inquiries 10%:
Whenever you apply for any kind of credit, a credit inquiry is reported. Too many of these, and they can negatively effect your scores.
Types of Credit In Use - 10%
Your types of credit in use lists how many accounts you have, and what kinds of accounts they are. Having too many loans can lower your scores.
If you're looking for a few ways to boost your credit scores, here are some ideas!
Raising Your Limits: Raising your limits is probably easier than you think. Often, all you need to do to get a higher limit is to ask! Call your credit card company and tell them you're considering a balance transfer with another company that's offering you a lower interest rate and a higher limit. Mention that unless they are willing to make the same offer, you'll cease your business with them. If they lower your interest rate, you're likely to receive a higher credit limit right along with it. Keep in mind that a lower interest rate won't add points to your credit score, but it'll still be great for your overall financial health.
For example ... Let's say you have a credit card with $5,000 as your limit and your balance is $4,000. Your card would be 80% utilized, well over the recommended percentage of 50%-or-lower. One phone call to the customer service department of your credit card company could raise your limit to $6,500. You would now be looking at a 62% credit utilization instead, which would definitely be a positive way to impact your scores.
Lower Your Balances -
Using the existing example, your credit card has a 62% credit utilization on it. You can still maximize your scores on this card. Paying $750 down will bring your balance down to 50% of the credit limit, or having $3,250 balance on a $6,500 credit limit credit card. Even if you can't afford to pay the $750, you're still sitting pretty because you've already increased your scores by having your limit raised. Keep in mind, though, if you are trying to purchase a home or a car, you can save thousands of dollars in interest on your new loan, and you can also get an even lower monthly payment, just by paying down your existing accounts. That will result in even better credit scores and the terms of your loan will be even better than before!
All of the tips listed above have shown to be effective and powerful in helping to achieve even better credit scores. One past result showed that these tips helped to increase the credit limit on 3 credit cards, and scores were boosted by 105 points!
The tips given here are best suited to work for people with a good credit history and for those with at least 3 open and established credit accounts. A more aggressive approach may be more appropriate for those with less than perfect credit, or with a negative credit history. - 15224
To explain what makes up your credit score in as simple terms possible, this is how it works
Payment History: 35%
Payment history makes up the largest piece of your credit scoring model. It reflects how timely you make payments to your creditors.
Credit Utilization 30%:
The percentage of available credit used. Keeping your account balances below 50% of the available credit limit will maximize your scores. For the purpose of this article, this is where we will find the most room to quickly increase your scores.
Credit History - 15%
Your credit history reflects how long your credit has been open. Older accounts receive more positive weight than newer accounts.
Recent Inquiries 10%:
Whenever you apply for any kind of credit, a credit inquiry is reported. Too many of these, and they can negatively effect your scores.
Types of Credit In Use - 10%
Your types of credit in use lists how many accounts you have, and what kinds of accounts they are. Having too many loans can lower your scores.
If you're looking for a few ways to boost your credit scores, here are some ideas!
Raising Your Limits: Raising your limits is probably easier than you think. Often, all you need to do to get a higher limit is to ask! Call your credit card company and tell them you're considering a balance transfer with another company that's offering you a lower interest rate and a higher limit. Mention that unless they are willing to make the same offer, you'll cease your business with them. If they lower your interest rate, you're likely to receive a higher credit limit right along with it. Keep in mind that a lower interest rate won't add points to your credit score, but it'll still be great for your overall financial health.
For example ... Let's say you have a credit card with $5,000 as your limit and your balance is $4,000. Your card would be 80% utilized, well over the recommended percentage of 50%-or-lower. One phone call to the customer service department of your credit card company could raise your limit to $6,500. You would now be looking at a 62% credit utilization instead, which would definitely be a positive way to impact your scores.
Lower Your Balances -
Using the existing example, your credit card has a 62% credit utilization on it. You can still maximize your scores on this card. Paying $750 down will bring your balance down to 50% of the credit limit, or having $3,250 balance on a $6,500 credit limit credit card. Even if you can't afford to pay the $750, you're still sitting pretty because you've already increased your scores by having your limit raised. Keep in mind, though, if you are trying to purchase a home or a car, you can save thousands of dollars in interest on your new loan, and you can also get an even lower monthly payment, just by paying down your existing accounts. That will result in even better credit scores and the terms of your loan will be even better than before!
All of the tips listed above have shown to be effective and powerful in helping to achieve even better credit scores. One past result showed that these tips helped to increase the credit limit on 3 credit cards, and scores were boosted by 105 points!
The tips given here are best suited to work for people with a good credit history and for those with at least 3 open and established credit accounts. A more aggressive approach may be more appropriate for those with less than perfect credit, or with a negative credit history. - 15224
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