Want to boost your credit score? Break it down.
You probably know a higher credit score can make you a more desirable loan candidate. But what really goes into your score, and how can you boost an area that is lacking?
Here is a breakdown of how FICO, the most commonly used credit scorer, determines your number, and what you can do to improve it.
Payment history, 35% of FICO score.
Before lenders extend credit to you, they want to know if you pay your bills on time.
Boost your score: Tame tardiness.
Paying a bill 30 or more days late could lower your score by around 100 points. Particularly serious issues in this category include:
collection accounts, uncollected debts, foreclosures, wage attachments or garnishments, tax liens, bankruptcies, which can stay on your credit history up to 10 years, and judgments, which can stay on your credit history up to 7 years.
Want to boost
your credit score?
Break it down.
You probably know a higher credit score can make you a more desirable loan candidate. But
what really goes into your score—and how can you boost an area that’s lacking?
Here’s a breakdown of how FICO, the most commonly used credit scorer, determines your
number, and what you can do to improve it.
New credit
Types of credit
Length of
credit history
695
Payment history
Credit Score*
Amounts owed
* National average as of August 2015. Source: myfico.com
Payment history
35%
Before lenders extend credit to you, they want to know if you pay your
bills on time.
Boost your score: Tame tardiness.
Paying a bill 30 or more days late could lower your score by around 100 points.
Particularly serious issues in this category include:
• bankruptcies
(which can stay on your
credit history up to 10 years)
• collection accounts
• judgments
(which can stay on your
credit history up to 7 years)
• wage attachments or garnishments
• uncollected debts
• foreclosures
• tax liens
Amounts owed
This category looks at how much you
https://www.bettermoneyhabits.com/credit/what-is-a-credit-score/how-to-boost-credit.html
30%
owe on credit cards and
installment loans, as well as what you owe on other types of accounts.
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Particularly serious issues in this category include:
Amounts owed, 30% of FICO score.
This category looks at how much you owe on credit cards and installment loans, as well as what you owe on other types of accounts.
Boost your score: Do not max out.
Having credit accounts and using them is not a bad thing. But if you are close to maxing out your accounts, you may be overextended, and considered more likely to default. Your credit score may improve as you pay your debts, leaving more of your available credit unused.
Length of credit history, 15% of FICO score.
A scorer considers the age of your oldest account, the age of your newest account, and the average age for all of them. It also considers how long it has been since you used your accounts.
Boost your score: Keep the old.
In general, a longer credit history means a higher score, so it can make sense to keep older credit cards active, even if you do not need them. Think twice before opening new accounts, since they lower your average account age. That said, FICO notes, even people who are newer to credit may have high scores, depending on the rest of their report.
Types of credit, 10% of FICO score.
Lenders see a mix of credit. For instance, credit cards and a mortgage. As a good thing because this can indicate you can manage more than one type of loan at the same time.
Boost your score: Mind your mix.
FICO notes it probably is not effective to open new accounts just to try to pump up your score. But in general, having credit cards and installment loans, such as a mortgage or car loan, and paying them on time, boosts your score.
• bankruptcies
(which can stay on your
credit history up to 10 years)
• judgments
(which can stay on your
credit history up to 7 years)
• collection accounts
• uncollected
debtsyour credit score? Break it down.
Want
to boost
• foreclosures
• wage attachments or garnishments
• tax liens
Amounts owed
30%
This category looks at how much you owe on credit cards and
installment loans, as well as what you owe on other types of accounts.
Boost your score: Don’t max out.
Having credit accounts and using them isn’t a bad thing. But if you’re close to maxing
out your accounts, you may be overextended—and considered more likely to default.
Your credit score may improve as you pay your debts, leaving more of your available
credit unused.
Length of credit history
15%
A scorer considers the age of your oldest account, the age of your
newest account, and the average age for all of them. It also considers
how long it has been since you used your accounts.
Boost your score: Keep the old.
In general, a longer credit history means a higher score, so it can make sense to keep older
credit cards active, even if you don’t need them. Think twice before opening new accounts,
since they lower your average account age. That said, FICO notes, even people who are
newer to credit may have high scores, depending on the rest of their report.
Types of credit
10%
Lenders see a mix of credit—for instance credit cards and a
mortgage—as a good thing because this can indicate you can
manage more than one type of loan at the same time.
Boost your score: Mind your mix.
FICO notes it probably isn’t effective to open new accounts just to try to pump up your
score. But in general, having credit cards and installment loans (such as a mortgage or
car loan), and paying them on time, boosts your score.
New credit
10%
Research shows that people who open several credit accounts in a
short period may be higher credit risks than those who don’t,
according to FICO.
https://www.bettermoneyhabits.com/credit/what-is-a-credit-score/how-to-boost-credit.html
Boost your score: Avoid asking for more.
This is a pretty small portion of your total, so you may not want to be overly concerned
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manage more than one type of loan at the same time.
New credit, 10% of FICO score.
Research shows that people who open several credit accounts in a short period may be higher credit risks than those who do not, according to FICO.
Boost your score: Avoid asking for more.
This is a pretty small portion of your total, so you may not want to be overly concerned about this category. Even so, it is generally a good idea not to ask for credit line increases too often, since that triggers an inquiry. Checking your own score has no impact, though: You can even sign up for a credit tracking service that continually monitors your score.
Keep it in perspective.
Keep in mind that these percentages are approximate, and scoring can vary: For example, people who are new to credit are factored differently than longtime users. As your use changes, so does the importance of each factor. One thing is for sure: If you always pay on time and avoid maxing out your cards, you are already on the right track.
The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America and or its partners assume no liability for any loss or damage resulting from ones reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment management.
For more information, visit bettermoneyhabits.com.
Boost your score: Mind your mix.
Want
to boost
FICO notes it probably isn’t effective to open new
accounts
just toyour
try tocredit
pump upscore?
your Break it down.
score. But in general, having credit cards and installment loans (such as a mortgage or
car loan), and paying them on time, boosts your score.
New credit
10%
Research shows that people who open several credit accounts in a
short period may be higher credit risks than those who don’t,
according to FICO.
Boost your score: Avoid asking for more.
This is a pretty small portion of your total, so you may not want to be overly concerned
about this category. Even so, it’s generally a good idea not to ask for credit line
impact, though: You can even sign up for a credit tracking service that continually
monitors your score.
Keep it in perspective.
Keep in mind that these percentages are approximate, and scoring can
vary: For example, people who are new to credit are factored differently
than longtime users. As your use changes, so does the importance of each
factor. One thing’s for sure: If you always pay on time and avoid maxing out
your cards, you’re already on the right track.
The material provided on this website is for informational use only and is not intended for financial or investment advice.
Bank of America and/or its partners assume no liability for any loss or damage resulting fromFor
one’smore
relianceinformation,
on the material visit
bettermoneyhabits.com
The material provided on this website is for informational use only and is not intended for financial
or investment advice.
provided. Please also note that such material is not updated regularly and that some of the information may not therefore be
Bank of America
and/or
partners
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any
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or damage
resulting
from one’s
reliancemanagement.
on the material
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when
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provided. Please also note that such material is not updated regularly and that some of the information may not therefore be
current. Consult with your own financial professional when making decisions regarding your
or investmentvisit
management.
For financial
more information,
bettermoneyhabits.com
For more information, visit
BetterMoneyHabits.com
https://www.bettermoneyhabits.com/credit/what-is-a-credit-score/how-to-boost-credit.html
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