5 Things that make up your credit score

Dated: 06/09/2019

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5 Things that make up your credit score 

A lot of renters are wanting to buy a home, but feel their credit score will hold them back from purchasing the home of their dreams.  They have no idea of exactly how to raise their credit score.  Just paying your bills on time isn’t enough to raise your credit.  Raising your credit does not only rely just on paying your bills on time.  Credit is an established history of your credit worthiness.  Look at how a credit score is derived.  Your credit score is comprised of payment history, credit utilization, length of history, types of credit and new credit.  Let’s look at each of these in more detail so you can be in the know about your credit.

1)Payment History-  This includes paying your bills by the due date with the minimal payment.  By doing this, you establish to creditors that you will be timely in your payments.  A creditor will find favor on you for paying your bills on time.  They begin to trust you to make a mends on your obligations.  Payment history can account for about 35% of your credit score.  Clarksville Lenders will usually look back on the last year of billing history.

2)Credit Utilization- This is a ratio of outstanding credit card balance to credit units.  It is usually assigned as a ratio.  For example, if you have a credit limit of $1000 and owe $300.  This is a credit utilization of 30%.  The higher this percentage is your FICO score will be lower.  Thus paying off as much debt to diminish or lower balances will raise your FICO score. 

3) Length of History:  The amount of time you’ve had your credit lines is important.  Essentially, most lenders will reflect on the past year of credit accountability, but the length of time you have established credit shows the effort over a longer period.  Once you’ve gotten a credit card or a loan and make efforts regularly over a longer period your credit score can get higher.  It gets established, you make regular payments in a timely manner and it becomes easier to gain credit worthiness. 

4)Types of Credit:  There are two kinds of credit: secured and unsecured.  Secured means there is some collateral attached to the loan. For example, if you buy a house the house becomes collateral.  It is something the lender attaches value to that they can use to get money back if the loan should not be paid.  Unsecured credit tends to come in the form of credit cards.  If these are not paid it will definitely affect your credit status and lower your FICO score. 

5) New Credit:  When applying for credit cards or often times utility service, creditors will apply a soft or hard inquiry to your credit.  Soft inquiries do not affect your credit as much as a hard inquiry does.  Generally, soft inquiries will not be on your credit report, but a hard inquiry can stay on your credit for often times two years or longer.  The amount of inquiries can affect credit because it shows creditors how much credit you are trying to obtain.  Trying to get too much credit will have a negative impact on your credit score.  

I am a Clarksville Realtor.  This information is used to help you in your journey toward buying your Clarksville Home or Nashville Home.  It is not meant to be the gospel or end all of all knowledge about this topic.  Please use this information as it propels you forward toward your home buying dreams.  And consult a lender for details and clarity on information presented in the document. 

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Adriane Hatfield

"Rocky Top, You'll always be home sweet home to me....Good Ole Rocky Top... Rocky Top Tennessee!!!"Those words have help shaped the spirit of Tennessee and it is with that spirit that many have recogn....

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