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Knowing What Makes up A Credit Score Keeps It High

By Brian Anderson
Published: Monday, November 16th, 2009

Having a good credit score advice is important in seeking approval for loan applications, getting insured, and even getting a job! So, you ought to know what makes up a credit score to have some leverage over it. Of course, you already know that a credit score is the mathematical equivalent of your credit standing. It contains information about your credit history and activity. 

Perhaps the one best credit score advice is to keep track of your credit report. Missing payments is the one thing you need to eliminate, if not considerably reduce, to keep your credit score looking good. 

Although the specifics about how a credit score is actually calculated is a closely guarded trade secret, we do know that there are five (5) elements or factors that make up a credit score. In 2009, there have been changes in how credit scores are calculated. You need to be updated on these so you don’t get lost or get shocked because “you didn’t know!” 48 

Here are the five (5) elements that make up a credit score:

  1. Payment History
    The difference between average and exceptional credit is still based on how soon and how well you can handle your payments. Before 2009, payment history had the biggest impact on credit scores at 35%. But beginning 2009, if you failed to sustain your clean report of paying on time and missed a couple of times, your credit score doesn’t automatically drop.

    However, take the credit score advice of maintaining your good paying record. When you decide on going for a foreclosure, it stays on your report for seven months. Also, the months before the foreclosure happened are also included.

  2. Amount borrowed in contrast to available credit
    If your payment history used to be the greatest factor in determining your credit score before, beginning in 2009 it is taken over by your revolving credit. This means that what used to be 30% of your credit score which is the amount of your revolving credit in relation to your available balances has now greater impact. It is calculated on individual accounts and overall accounts.

    A credit score advice you can follow is to avoid borrowing more than 50% of your available balance from a single lender. This is the same as borrowing only 33% or less than your available balance. Also another credit score advice to keep your credit score safe is to borrow little amounts using several credit cards rather than maxing out on one.

  3. Length of credit history
    This may sound strange but keeping your accounts open over seven years effectively raises your credit score. Of course, a credit score advice is to keep at least three credit cards and maintaining their low balances. 15% of your credit score comes from the length of your credit history. It’s better to pay off your credits rather than closing them. Keep them open with a small a small amount to be paid every month.
  4. Inquiries and new debt
    10% of your credit score comes from credit inquiries you make. Inquiries reflect your capability as a borrower. If you have too many inquiries, that could mean you’re into financial trouble having too many debts. A credit score advice is to keep the inquiries because of an application you made for credit to the minimum.
  5. Type of debt
    The final element affecting your credit score is the kind of debt you make. There are essentially two kinds of debts: installment and revolving. If you can, avoid having revolving credit since the other type is more favored. In 2009, credit score advice for upping your credit card score, which applies to all, is to manage both types of credit.

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