What Makes Up A Good Credit Score – 7 Tips For Finding The Right One
This video explains the 5 factors that go into calculating your credit score and gives tips on how to improve each individual factor.
The 5 Factors:
Payment History (35%): Pay all of your bills on time. This is the biggest factor in your credit score so it is important to pay your statements on time. This does not mean it has to be paid in full. At least pay the minimum before the due date.
Credit Utilization (30%): This is the second largest factor in determining your credit score. It is extremely important that you use less than 30% of the availability you have on all credit cards. Tip: pay off your credit card multiple times a month to not exceed the 30%.
Credit History Length (15%): There isn’t much you can do about this one. Just know the longer you have credit lines open, the better your credit score will be for this factor. Also try not to close any open credit lines.
Credit Inquiries (10%): 2 types of credit inquiries. Soft inquiries and Hard inquiries. Soft inquiries do not affect your credit score. Hard inquiries hurt your credit score by a few points and the impact typically lasts between a few weeks and a few months.
Credit Types (10%): There are 3 main types of credit. Revolving, installments and open credit. The more types you have open, the better your credit score will be.
It is important to first understand the underlying credit score system in order to improve your credit score. Besides knowing the 5 main factors that affect your credit score, this video talks about how credit scores are obtained using the separate credit score models and how they are connected to the 3 main credit scoring agencies including: Experian, Transunion and Equifax.
This overview video is a great way of familiarizing oneself to the credit scoring system. I also explain the importance of the FICO score as well as where to obtain a FICO score, both free and paid.