Go Ahead, Give Yourself Credit!

You are trying to buy a car, a house, or even a farm and the lender has you fill out a credit application to help calculate your credit score.  You know you have one, but like most others, you are still confused over what it is, why it exists, who controls it, and how you can affect it.

 

Over the last decade, consumer and commercial lending decisions have relied heavily on the confusing variable known as a credit score.  Here’s what it is – a numerical value representing your likelihood of paying the loan back as agreed.

Here are five factors that are considered in your credit score and their approximate weight:

Payment history (35%)

• Amounts owed and the amount of credit limits utilized (30%)
• The length of your credit history (15%)
• The types of credit you are utilizing (10%)
• Amount of new credit, and changes to your credit report (10%) 

It's important to know that the higher your credit score, the better.  So how can you improve your score? Here are a few tips: 

• Pay your bills on time, every time
• Don’t use every dollar of available credit on your line or card
• Limit the number of new accounts and credit inquiries
• Credit history length is measured by the age of your oldest card (so keep that one!)
• Be patient – it takes time

Now that you have a better understanding of what makes up your credit score and how to continuously improve it…go ahead and give yourself some credit!