Host: What goes in to determining my credit score?
Vikki Frank: There are a lot of different factors that you in go determining a credit score, and again since there are a lot of different credit scores as we’ve discussed in previous segments. Each of these scores are going to have their own mathematical algorithm. But generally there are five or six major determining factors on a credit score.
The first is your payment behavior. And this actually waits recent behavior much more than previous behavior. So when is the last six or 12 months look liked? Have you been delinquent on accounts? Have you been paying back all of your open accounts on time every month? This is by far the most significant and usually incorporates between 30 and 35 % of any score.
The second section has to do with debt and debt utilization. How much debt do you owe? How much that do you owe compared to how much your credit limit is? So, if you have a credit card and they’ve offered you a $1000 and you have $999.00. You’re going to be penalized for that. It’s generally best to be keeping a credit card or revolving account below 50 or 30% even of the outstanding credit limit. They’re going to be also be looking at just the total value of the debt that you have outstanding.
Another thing they’re going to look at is your length of credit history. Obviously, longer that you have been performing well, the better that that will show. So if you had a credit card since you were in high school, and you’ve always paid it back on time that’s going to show really nice length of credit history. And if you're brand new to credit you can still have a very good credit score even if you’ve only been using credit for six months or 12 months, but the longer and as that length of history becomes longer. It’s going to only add and so having that behavior started today and keeping that behavior good as long as you can is really essential.
The last two factors is when is called recent credits? So it’s thinking about have you been looking for a lot of recent credit. And this has been something that people are really worried about in terms of their credit score. We although looking for credit. And basically it’s usually less than 10% of your total credit score, but it’s basically have you been looking for a lot of credit recently? Does this show something that you’re in emergency situation where you needed to get a lot of access to funds quickly? But generally it doesn’t have that much of an impact.
And the last is diversification of your portfolio just like anything else we know that a healthy portfolio or healthy credit is about diversification. So you have different kinds of credit. Do you have a credit card? And then maybe some installments loan like a mortgage or a car. So having different kinds of credit and demonstrating good behavior and all of these a really good way to demonstrate good credit.
Transcription by:
Scribe4you Transcription Services