World Photo Made Up Of Numbers And Says What's Your Number?

Do You Know the Top 3 Factors that Impact Your Credit Score?

In today’s financial landscape, it is important to be diligent with your credit. From getting car insurance to a new apartment to a new job; your credit score can affect you.

There are many factors that make up your credit score ratio, but the following are major considerations. Your FICO score is a three-digit number which can range from 300 to 850 and is a major factor in determining your creditworthiness when applying for a loan. Many people are unsure about how it is calculated or what actions they can do to improve their score.  Here are the top 3 factors that impact your score:

  1. A solid payment history – 35% of your credit score is based on your payment history, so it is imperative that you pay your bills on time. Paying late can drastically drop your credit score especially if it is a mortgage loan that is past due. This particular late payment can impact your score by 50 or 100 points! Overall, more weight is placed on your current payment history within the last 12 months.
  2. Capacity is king – 30% of your credit score is based on capacity which is how much credit you can handle. Carrying high balances relative to your limit on your credit cards, also known as maxing out your credit cards, is a bad idea. This shows lenders that you are relying heavily on credit to get by and will negatively impact your score. Ideally, you should pay off any credit card debt you charge each monthly or aim to use less than 25% of the available balance.
  3. Length of credit – 15% of your credit score is based on how long your credit has been established. Therefore, it is a good idea to keep your oldest credit card open even if it carries a zero balance. Closing credit cards that have a long credit history can negatively impact your score.

It is wise to check your credit score once a year to determine if you need to make any changes in your monthly budget or lifestyle to improve your score. Improving a bad score is possible, but it will take time and commitment on your part, which is why New Dimensions Federal Credit Union provides credit counseling to its members. If you would like more information on credit counseling services, please call Tanya Verzoni, Director of Financial Education, at (800) 326-6190.