Your Credit Score
- What You Need to Know!

Your credit score describes your willingness or ability to repay for goods or services purchased without immediate payment or security.

This score is the single factor that lending institutions use to determine whether or not you will be granted credit. Your existing credit status as well as your past standing makes up your score.

The United States has a national individual credit average somewhere from 580 to 650. The likelihood of your being granted a loan or a credit card is much greater if your personal score is over 700.

Your score is actually a composite of your history regarding debt payments and your present financial condition.

  • 35% is based on your payment history (making your payments on time)
  • 30% is determined by how much you owe compared to your monthly income (debt-to-income or DTI ratio is calculated by dividing what you owe by your gross monthly income and it should be under 30%)
  • 15% has to do with how long you’ve had credit (so try to keep your oldest account in place)
  • New credit accounts opened account for 10% of your score
  • The last 10% is based on the types of credit (secured, like a car loan or a home mortgage) versus unsecured (credit cards)
  • Here are some of the basics for improving your score:

    First, always remember the Golden Rule of credit: never, ever purchase with credit cards what you can’t afford to pay for in full when the bill comes due. While it is important that you have and use credit cards, the fatal trap is to use these cards to pay for something you really can’t afford.

    When you pay your bills on time or before its due date, you are establishing good credit standing. Another advantage when you are paying ahead of time is that you are also making your balances low.

    Late payments of bill will not only give lending institutions bad impressions of you but it can also decrease your score. To avoid late payments, it is best to keep track of due dates. Prompt yourself that it is pay time a week before your payment is due.

    Keep the interest percentage you pay at a low level. Interest rates are generally based on how good or bad your score is as well as the national average credit score.

    Consolidate your debt especially if you’re having trouble paying all your debts on time. This will lighten the pressure you feel and make it possible for you to stay on time with your payments.

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