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    Five Factors Impacting your FICO Credit Score

    By Wasatch Peaks on October 4, 2016

    Topics: Credit

    There is no such thing as exceptional or perfect FICO credit score. Sure, a higher credit score will qualify you for some of the lowest possible interest rates. This applies to easy home loans, credit cards, personal loans, auto loans, etc.

    Your credit score plays a huge part in the home loan process. However, one cannot pursue a higher credit score without an understanding of the many factors that are weighted in FICO calculations.

    The five elements of your credit history are as follows:

    • Payment history – 35%
      Steady on time payments have a big impact on your credit score. Even one late payment can hinder your plans, so staying on top of your payments is essential. If you are unable to make payments, for any reason whatever it may be, make sure you call and make agreements with your creditors.
    • Credit Utilization – 30%
      Given that it accounts for 30 percent of your credit score, try to avoid using more than 30 percent of the total credit that has been given to you.
    • Length of Credit History – 15%
      If you are young your credit score is the least of your worries, it’s more about building good personal finance habits. Nonetheless if you have been using credit for a while and have made a dent in your student loans, or credit cards then credit history is in your favor.
    • New Credit – 10%
      A possible lender will be uneasy if there is indication that you have taken on a bunch of new debt recently, obtained new credit lines, or had a dozen new inquiries.
    • Credit Mix – 10%
      Generally lenders tend to favor those who have shown they can handle several types of credit and debt. The more sophisticated your desire for credit and debt is, and the greater your track records of making steady payments the more likely this will be shown in your credit score.

    If you have a mixture of installment loans, and rotating credit accounts, it will be much simpler to constantly improve your credit score.

    Wasatch Peaks

    Written by Wasatch Peaks