Banking 101 Series – Part 2: Your Credit Rating
Throughout your life your credit score follows you around like your shadow. It is one of the most important things in everyone’s life, and ignored by most people. The lack of understanding how your personal credit score works, and what influence it has in your life, contributes to the quality of your life both positively and negatively. By ignoring this reality, you’re caused to pay higher interest rates, and in worse cases not able to buy reliable transportation car or gain approval for a home mortgage.
By being aware of your credit score, you can influence your credit rating positively and save much aggravation over your lifetime, as well as save money.
Factors which influence your credit include:
- 35% is based on your payment history
- 30% is based on current debts
- 15% is determined by credit history
- 10% is allocated to new credit applications
- 10% is about types of current credit
A few additional influences on your credit score and credit worthiness:
- Carrying high credit balances can decrease your score.
- Skipping payments or paying late can negatively impact your score. Certain negatives remain on your credit history for 7 years.
- Having a mix of credit products, such as a mortgage, a car loan, a home equity loan, and one or two credit cards is considered healthier than having multiple credit cards.
- The sooner you pay attention to your credit health the easier it is to maintain a good credit score.
For individuals who currently have a bad credit score, there are ways to retain a professional credit specialist who will work with you, and help improve and change your score.