There are at least 5 key components that make up a homeowner's final score. There are important factors a homeowner needs to learn especially if they need to improve their credit score. Your credit score are not just a random raffle of numbers or based on how big your income is.
1. The record of timely payment on loans. This makes up 35% of your credit score. This is basically the history of your payment that is made up of all your payments on things like credit cards, utility bills, car loans, etc.
2. The types of debts and the total outstanding balance composes 30% of your credit score. Another way to understand this component is to answer the question, how much credit you use. If you have a $15,000 credit limit on your credit card, do you use it every month or charge only thousands on it. Experts recommend that you only use 30% of your available credit to maximize credit score.
3. The length of credit history, which is 15% of your credit score. This history includes things like credit cards, mortgages, auto loans, etc. Take note that a great payment history doesn't mean a whole lot, if the history only spans a six month period. Credit bureaus are looking at the overall age and length of time that you have been in their system.
4. Types of credit used/The mix of credit accounts, which is just 10% of your credit score. This determines the individual's 'financial experience' with different types of credit especially if they had success in managing a mortgage, credit, and other types of loans.
5. Applications for new credit/Number and types of accounts opened recently is also 10% of your credit score.
You need to learn how to read and understand a credit report because knowing your credit score is not enough. A credit report is consists of four sections and these are:
1. Identifying information - your personal record; 2. Credit history - your trade lines; 3. Public records - if you have any legal proceedings; 4. Inquiries - your new applications for credit
A better understanding of credit score and credit report will guide a homeowner to make better financial decisions in his life. To make sure that you always fall on having an excellent credit score, pay on time and limit the amount of credit you use at one time.
1. The record of timely payment on loans. This makes up 35% of your credit score. This is basically the history of your payment that is made up of all your payments on things like credit cards, utility bills, car loans, etc.
2. The types of debts and the total outstanding balance composes 30% of your credit score. Another way to understand this component is to answer the question, how much credit you use. If you have a $15,000 credit limit on your credit card, do you use it every month or charge only thousands on it. Experts recommend that you only use 30% of your available credit to maximize credit score.
3. The length of credit history, which is 15% of your credit score. This history includes things like credit cards, mortgages, auto loans, etc. Take note that a great payment history doesn't mean a whole lot, if the history only spans a six month period. Credit bureaus are looking at the overall age and length of time that you have been in their system.
4. Types of credit used/The mix of credit accounts, which is just 10% of your credit score. This determines the individual's 'financial experience' with different types of credit especially if they had success in managing a mortgage, credit, and other types of loans.
5. Applications for new credit/Number and types of accounts opened recently is also 10% of your credit score.
You need to learn how to read and understand a credit report because knowing your credit score is not enough. A credit report is consists of four sections and these are:
1. Identifying information - your personal record; 2. Credit history - your trade lines; 3. Public records - if you have any legal proceedings; 4. Inquiries - your new applications for credit
A better understanding of credit score and credit report will guide a homeowner to make better financial decisions in his life. To make sure that you always fall on having an excellent credit score, pay on time and limit the amount of credit you use at one time.
About the Author:
If you have plans in buying a property at Homes for Sale Phoenix Arizona, know your credit score first. Knowing what your credit score means puts you in the advantage position and allows you to make better decisions whether to pursue your dream of buying Lehi Utah Homes for Sale or wait to build your credit score.
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