Saturday, April 19, 2014  












Building a Rock Solid Credit Score

1. What Makes Your Score?

  • 35% = Based on payment history (i.e. on-time or delinquent)
    - More weight on current pay history

  • 30% = Capacity (capacity is king)

  • 15% Length of credit

  • 10% Accumulation of debt in the past 12-18 months
    - Number of inquiries and opening dates

  • 10% Mix of credit
    - Installment (can raise) vs. revolving (can lower)
    - Finance company loans can lower your score

2. Range of Scores:

  • 850 - 730 = A+

  • 729 - 680 = A

  • 679 - 640 = B

  • 639 - 600 = C

  • 599 - 550 = D

  • 549 and Below = E

3. What Actions Hurt Your Score?

  • Missing payments (regardless of amount, it can take 24 months to restore credit with one late payment)

  • Credit cards at capacity (i.e. maxing out credit cards)

  • Shopping for credit excessively

  • Opening numerous credit accounts in a short timeframe

  • Having more revolving debts in relation to installment debts

  • Closing credit cards (this could lower available capacity)

  • Borrowing from finance companies

4. What Can Improve Your Score?

  • Pay off or pay down credit cards

  • Do not close cards because capacity may decrease

  • Move revolving debt to installment debt

  • Make payments on time (older late pays become less significant)

  • Slow down opening of new accounts

  • Acquire a solid credit history with years of experience

5. Approximate Credit Weight for Each Year:

  • 40% = current to 12 months

  • 30% = 12 - 24 months

  • 20% = 25 - 36 months

  • 10% = 37+ months

 

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APY=Annual Percentage Yield
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