Do You Understand Your Credit Score? | Refresh Financial

Do You Understand Your Credit Score?

 

35% of your credit score comes from payment timeliness. This is any payments you make on ANY sort of credit. It could be a credit card, a phone or utility bill, a student loan and more. If you are consistently making late payments, your score could be damaged. We recommend setting up a monthly reminder (or two!) on your computer, phone or dayplanner for any payments you have to make. Make it a priority to pay them the day before they are due.

30% is your amount of debt. This is calculated based on your ratio of balances owed to total available credit. So, maintaining a balance on your credit card isn’t necessarily a bad thing - as long as it is under 30% of the total limit. If you are maxing out your credit card consistently, this will negatively affect your score.

15% is based on the length of time each account has been open and the length of time since the account's most recent action. As a result, someone who is new to credit cannot have a perfect credit score. A longer credit history provides more information and offers a better picture of long-term financial behavior.

10% is new credit and credit inquiries. Yes, that’s right - inquiring about your credit can poorly affect your score. So can applying for new credit. So, if you are rejected by one credit card, don't immediately go apply for three more - because this just makes you look like you are struggling financially and therefore lessens your score.

10% is for the different types of credit you have. Basically, if you have a credit card, a mortgage, a student loan or a combination of any multiples of different sorts of credit AND you are managing to make on-time payments, you look better than if you have simply five different credit cards.

In short, pay your bills on time, don't max out your credit cards or line of credit, keep your accounts open and up to date on payments and don’t apply for different types of credit or multiple loans at once. And, while you are re-establishing your credit, a great option is to apply for a savings loan at Refresh Financial - helping you to rebuild your credit while saving a little bit each month!

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