Credit scores are determined by several key factors, which are weighted differently depending on the scoring model (e.g., FICO or VantageScore). Here’s a concise breakdown of the main factors:
- Payment History (35%): Your track record of paying bills on time. Late payments, missed payments, defaults, or bankruptcies negatively impact your score.
- Credit Utilization (30%): The ratio of your current credit card balances to your available credit limits. Keeping this below 30% is ideal.
- Length of Credit History (15%): The age of your oldest account, the average age of all accounts, and the age of your newest account. Longer histories generally boost scores.
- Types of Credit (10%): The mix of accounts, such as credit cards, mortgages, auto loans, etc. A diverse mix can positively affect your score.
- New Credit Inquiries (10%): Hard inquiries from applying for new credit can temporarily lower your score. Multiple inquiries in a short period may signal risk.
- Amounts Owed (varies by model): While related to utilization, this also considers the total debt across all accounts. High balances can hurt your score.
Maintaining timely payments (minimum auto-pay recommended, keep in mind you can always make manual payments or payoff accounts entirely, minimum auto-pay insures on time payment with consistency) , low balances, and a long, diverse credit history while avoiding excessive new credit applications will help improve and maintain a strong credit score.
- Access to Better Loan Terms: Good credit often qualifies you for lower interest rates on loans, such as mortgages, auto loans, or personal loans, saving you money over time.
- Higher Approval Odds: Lenders and creditors are more likely to approve your applications for loans, credit cards, or financing if you have a strong credit score.
- Lower Insurance Premiums: Many insurance providers use credit-based insurance scores to determine premiums. Good credit can lead to lower rates on auto or home insurance.
- Renting Advantages: Landlords often check credit scores. Good credit can make it easier to rent an apartment or house and may reduce security deposit requirements.
- Better Credit Card Offers: A high credit score can unlock premium credit cards with rewards, cashback, or travel benefits, often with lower fees and interest rates.
- Employment Opportunities: Some employers check credit reports as part of the hiring process, especially for financial or sensitive roles. Good credit can improve your chances.
- Utility and Service Approvals: Utility companies, like those for electricity or internet, may waive deposits or offer better terms for customers with good credit.
- Financial Flexibility: Good credit provides access to higher credit limits, giving you more flexibility to manage emergencies or large purchases.
- Faster Debt Repayment: With lower interest rates, more of your payment goes toward the principal, helping you pay off debts quicker.
- Peace of Mind: Maintaining good credit reduces financial stress by ensuring you have access to affordable credit when needed.
Building and maintaining good credit through timely payments, low credit utilization, and responsible financial habits can open doors to these advantages.
Credit Builders CAN:
- Settle debt that is in collections or in the original creditors ownership for a lessor cost than the posted debt set for collections.
- In some cases we can have the debt entirely deleted from record after the debt is paid and satisfied.
- Legally demand the deletion or correction of debt records on a personal credit report.
- Monitor your credit with alerts if any irregular activities occur.
- Make legitimate debt magically go away by disputing the record on file with Equifax, TransUnion and Experian.
- Speed up the credit building process, a minimum of 6 months is required for our services.
- Force you to follow successful financial advice that we will provide you on a regular basis.
Employers must obtain written permission from a consumer before accessing their credit report for hiring or promotion decisions.
If an employer takes adverse action based on a credit report, they must provide the consumer with a notice, including the CRA’s contact information and a copy of the report.
Consumers can place fraud alerts or security freezes on their credit files to prevent unauthorized access or use of their information.
Victims of identity theft have rights to dispute fraudulent information and receive assistance from CRAs to restore their credit.
Medical information in credit reports is subject to strict privacy rules and cannot be disclosed without consumer consent.
CRAs cannot report outdated or irrelevant information, such as non-fraudulent accounts older than seven years.
