Your credit score number is used by lenders to objectively measure your creditworthiness. The higher your score, the more likely you are perceived to repay a loan. Your credit score is created by these weighted factors:
- Payment history – 35%
- Capacity to pay – 30%
- Length of credit history – 15%
- Frequency of applying for credit in a short period – 10%
- Credit mix (credit cards, retail cards, mortgage, personal loans) – 10%
Actions that can damage your credit score include: missing payments, using credit cards at capacity, closing credit cards out, excessive shopping for credit, having more revolving loans in relation to installment loans, and borrowing from finance companies.
Before you apply for credit, take steps to clean up your credit report by:
- Paying all your bills on time
- Keep each account balance at less than 25% of your available credit limit
- Don’t close old accounts right before you apply for credit
- Don’t open a flurry of new accounts right before you apply for credit
- Don’t co-sign for another person with bad--or no-- credit.
If you still have questions about your credit score, contact Nusenda Credit Union at 889-7755 (800-347-2838 outside the Albuquerque area). Your Credit Union can help you sort out the facts.
Sources 12/13: Lead article in Associated Press, as well as credit scoring information published on FICO's website.
Download a copy of this article.