Did you know
What makes up your credit score? Your credit score is calculated based on 5 different categories.
1. Your payment history
The biggest being your payment history. Do you have frequent late or missed payments? For some clients, scheduling an automatic minimum payment every month helps to avoid having missing or late payments. Scheduling an amount that you’ll always be comfortable with can help to make payments on time. Payment history makes up 35% of your credit score, so be sure to do everything possible to make sure you are paying on time.
2. Your credit usage
The second biggest factor in determining your credit score is going to be your credit utilization. This makes up 30% of your credit score, and using more of your available credit can lead to a possible lower credit score. Credit card debt can sometimes compound quickly, especially with a high interest rate. If you feel like your credit card debt is spiraling out of control, it may be beneficial to speak with a debt relief counselor to see what the best options are. Many non-profit organizations and credit unions may offer these services for free or at a low cost. When seeking these services, be sure that the counselor is legitimate to avoid scams or fraudulent offers.
3. The age of your credit history
The age of your credit history makes up 15% of your credit score. This is why it can be a great option for some to utilize a credit card as young as possible. For example, if you got a credit card when you turned 18, it may help to improve your credit score as you will have a longer credit history, as you grow in age.
4. Credit type
It’s also beneficial to have a mix of credit and different types, as it makes up 10% of your credit score. For example, having a manageable credit card, car loan and personal loan may help your credit score.
5. New credit
The final factor in your credit score is your new credit and makes up 10% of your credit score. If you’re applying for a mortgage loan, it may be best not to open new credit cards for example, as it may lower your score.
No matter what your credit situation looks like, we will always explore all options for you to see if it makes sense to get a mortgage loan. If your credit score is low, you may have a higher interest rate or higher down payment requirements, but can be an excellent option for certain borrowers. Building equity is beneficial in so many ways and can help to build your long term wealth, helping to make your dreams come true! What are you waiting for? Call us today to explore your options!