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What Impacts Credit Score? 5 Things That Make A Difference

What impacts credit score

What impacts credit score?

There’s a number of things that can have a big impact on your credit score. Knowing what impacts credit score can help make sure you keep your score high, saving you thousands of dollars in interest payments over your lifetime.

What Impacts Credit Score And How Is It Calculated?

The 5 things that determine how your credit score is calculated are:

Payment History

Meaning any late payments; collection items; write offs; bankruptcies; consumer proposals; consolidated orders to repay; judgments; liens or asset seizures will negatively impact your score. All of the above are time based, meaning the older the information, the less it is contributing to your overall score.

Credit Utilization

It is best to have several accounts with low balances distributed then it is to have fewer accounts maxed out. To calculate utilization: Balance (divided) by Credit Limit = percentage. Lower than 10% utilization is recommended per account, and this is one of the fastest means for increasing your overall credit score. In other words, the relationship between your balances and your limits needs to be monitored and managed closely.

Established Credit History

The longer you maintain open accounts with creditors the better, plain and simple.

Credit Inquiries

Don’t apply for credit unless you can get it or that you need to get it; unnecessary credit inquires are going to negatively impact your score – especially if your overall credit file is small to begin with.

Tip: When applying for credit, pull your own credit report first (this is a soft hit and won’t drop your credit score). With credit report in hand, visit your local banks or credit unions. Show them your reports; and don’t allow them to pull a credit report of their own unless they can say for certain that you will be approved, this way you save yourself unnecessary pulls on your credit report if they decline you. If they say yes, you are approved, than they will need to pull credit report to seal the deal.

Mix of Credit

Use different types of credit (revolving; installment; auto; mortgage…) evenly. Also remember the advice which a lender gives you is productive for getting a loan; but not always good for the credit scores. If they tell you to consolidate and close accounts be careful how you go about this, most people’s compliance usually results in dropped credit scores. You are shrinking your overall available credit limit verses your balances… so remember you don’t want to hurt the utilization by consolidating and closing accounts behind you.

Your credit score isn’t where your credit begins, it’s where it ends.

By. Jayson Lowe – Debt Advisor with the McGuire Financial Group and Co-Founder of McGuire Insurance Services

Tune in again for more helpful suggestions from Jayson

Are you starting to see how important your credit score is? Leave your comment in the box below.

what impacts credit score