How your credit score is calculated
October 27, 2009 by admin
Filed under Credit Reporting and Repair
Credit score calculating is not easy, it involves complex formula. It is based on lots of information. There are infinite number of factors that the FICO score is based on. The basic purpose behind this that you should handle your credit more responsibly.
It’s usually easier to loose your points, but difficult to get it back. So you should always consider improving your score and protect them at the same time. The penalty is high if you have high score and any mistake.
The following five are the major factors that affect your credit score according to their relative level of importance. The level of importance varies with the individual score.
1. Your Payment History
This contributes about 35 percent of your credit score. Your payment history shows how responsible you are with your credit. Lenders wants to know how good you are in paying bills on time and more consistently. If you have never been late, you clean history will help maintaining good score.
2. How much you owe
This makes up about 30 percent of your score. The score is based on the total amount you owed on all accounts and how much you owe in different kind of account like credit card, personal loan, mortgage etc. The higher difference between your balance and limit, is better for your credit score.
3. How long you have had credit
This is around 15 percent of your total score. This relatively less important as compared to the previous two factors. You may have good score with a short history, but if you can maintain it for long run, that’s better. The score considers the age of your oldest account and the average age of all your accounts.
4. Your last application for credit
This is 10 percent of your overall credit score. Opening new account can lower your credit score. Opening too many accounts in short time is considered as negative sign for your financial situation.
5. The types of credit you use
This constitutes around 10 percent of your score. The FICO score gives importance on combination of different types of credit. It’s better to have mix of revolving debt like credit card and installment debt like auto loan, mortgages etc.
How can I cancel credit cards I have without getting dinged on my FICO score?
April 19, 2009 by admin
Filed under Questions and Answers
I have several credit cards that have annual membership fees required. But I do not use them and have no plans on using them in the future. I’ve been told that if I cancel these cards that my credit scores will suffer because of the cancellations. Is there a way to cancel these cards without causing anymore danage to my credit scores?
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How many credit cards can you have before they drop your credit score?
February 5, 2009 by admin
Filed under Questions and Answers
I heard having too many credit cards can lower your FICO score even if you pay them full each month. How many can you get before they drop your score?
I had problem getting a credit card when I had no credit history and then after I finally got one, I had difficult time getting another one, because banks said I had “too few” revolving accounts. Now I have 5 credit cards and only 1 of them carry balance. My balance to credit ratio is 6% and my FICO score is 740.
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