What Really Affects Credit?

Credit is one of life’s skills that should be active in your everyday life.   This one factor is what helps the banks decide if they want to loan you the money for a new car or not.  Unfortunately, things sometimes happen and our credit slides down the scale into the poor credit area.  While the credit scale calculations are a tightly kept secret for exact figures, large functioning sections are blocked out.  This lets us break down the score into smaller bites providing a recipe to turn bad credit back into good credit.   

The two major components that compile to sixty-five percent of your credit score is payment history and amount owed.  While the payment history is thirty-five percent of your credit score, it is also the slowest to change.  History is stored for the past seven years and therefore, only waiting your time as you make good payments will cause this category to rise.  Don’t open any new accounts that you cannot make your payments on time, every time.  Also, paying off old accounts does not take them off your credit report until the seven years is up.  If you consistently make payments over a long period of time, the older late payments start to become less importance regarding the score of this category.

The category of amount owed is much easier to control and utilize to increase your credit score in a somewhat reasonable period.  This category is worth thirty percent of your credit score.  The most important factor is to pay off the debt rather than moving it to another debtor.  The lower utilized balance provides a better score than one with a used near their maximum available credit.  Also, do not close or open credit cards to raise your credit score in a short term.  This can back fire and lower your credit score

Another tip is if your credit history is very short, do not open many credit as this is a risk sign for the credit bureaus.  Mr. Ed Finance has some other important tips to making sure that you maintain your credit properly located here.


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