5 Credit Score Categories that can Make or Break Financial Opportunities
When it comes to major financial commitments, like applying for a home loan, there are various credit score factors that are taken into account.
There are 5 credit score categories that can make or break financial opportunities.
1. Payment History: Payment history is one of the biggest credit score factors out there. There are a lot of items factored into assessing your payment history, including:
*Missing a payment
*Number of missed payments
*Time since missed payments
*Severity of missed payments
Missing 1 payment in ten years is a nothing to worry about as it is a minuscule deduction from your credit score ranking. However, recent missed payments will be weighed heavier.
2. Total Debt: The 2nd largest credit score factor is your total amount of debt. Total debt includes all credit card balances, auto loans, mortgages, and other forms of debt.
3. Length of Credit: The longer you have open credit, the easier it is to determine behavior.
4. Types of Credit: There are 2 types of credit: installment (auto loans and mortgages) and revolving (credit cards). Your credit score is determined by the amount and variety of these credit types.
5. Credit Applications: Every time you apply for a line of credit, your credit history is pulled. Since credit applications are viewed as needing money, the time since your credit history was pulled last is a deciding factor is determining your credit score.
Applying for store credit cards to get the additional 15% off sounds like a good idea at the time, but in reality it could be hurting your credit score. It is smart to avoid having lenders pull your credit score unless you are seriously in need of a loan.
With a better understanding of credit score factors, you’ll be able to work on building or maintaining good credit.
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