Factors That Impact Your Credit Score

There are five factors that impact consumer credit scores. They are listed here in order of importance:

Payment History has a 35% impact.

Paying debt on time and in full has a positive impact. Late payments, judgments, liens, collections, profit & loss, bankruptcies, foreclosures, notice of default, charge-offs, etc. have a negative impact and are included in Payment History.

Outstanding Credit Balances have a 30% impact.

Debt ratio of outstanding balance to available credit is important. Keeping that below 30% is required for higher scores and a near zero balance even wiser. It is never a good idea to close an account if your ratios are already high; the debt ratio will go up and the number of seasoned trade lines will decrease. Pay outstanding debt down as close to zero as possible. Pay off the cards with the highest interest rates first. Hitting the maximums of available credit can be very negative. If you need to reduce your ratios quickly, it may be worth calling and asking the credit company to increase your available credit to lower the debt ratio, provided they can do so without a hard credit inquiry.

Credit History has a 15% impact.

The length of time a particular credit line has been opened is important. A seasoned borrower is stronger. 24 months or more of on-time payments will increase the chance of producing a higher credit score. Also, scores are assessed on cumulative reporting time for all accounts. Closing an older account with a longer payment history may have a negative impact on your scores.

Type of Credit has a 10% impact.

A mix of auto loans, credit cards and mortgages is positive, rather than a concentration in credit cards only, but is not necessary in order to achieve scores that will allow for the purchase of a home or a refinance. Good scores can be achieved using only revolving trade lines such as credit cards and installment loans such as personal or auto loans, but the scores may not be as high.

Inquiries have a 10% impact.

Hard inquiries for credit will negatively impact the score. Auto and mortgage inquiries receive special treatment. Credit inquiries for mortgage loans have no effect on the score for pulls within the most recent 30 days. However, once 31 or more days have passed, all inquiries with-in a 30 day period from the first pull will count as one hit on your credit. Automotive inquiries use a 14 day period. Each hard inquiry can cause your scores to lower. Inquiries can remain on your report for up to 2 years.

To learn more, visit www.creditrepair-4you.com.