How is My Credit Score Calculated?
How a credit score is calculated is a mystery to a lot of consumers when looking to purchase a home in Flagstaff, AZ. Your credit score shows the likelihood that you will repay the credit that is given to you.
Credit Scores fall between 350 and 850 and your score at any one time is just a representation of that moment in time, and can change with any additional purchases or delinquent payments etc.
This is the break down to estimate your credit score--
35% of your credit score is based on Payment History--what goes in to this is if you pay your bills on time, or were you late on any bills--Â based on the number of late payments and the amount of late payments, your score can be affected accordingly. This number also takes into account how long you have had certain credit cards open in your name, the longer you've had a specific credit card in your name, the better the impact it is on your score.
30% of your credit score is the Amount You Owe--If you have a lot of credit cards, it can affect your score negatively. If you have too few cards, it can also negatively affect your score. If you cards that have over 30% of your limit as a balance, that can also negatively affect you. So you if you have a limit of $5000 on your card, you don't want to have a balance of over $1500.
15% is your Length of Credit History--Again, the longer you have had credit with your credit cards, the better. If you have any cards that you haven't used in a while, it's recommended you make a purchase once every 6 months to keep them active and affecting your score positively.
10% is New Credit--you don't want to open a lot of lines of credit in a short amount of time. It shows that you are a higher risk, so it will negatively affect your score.
10% is the Types of Credit You Have In Use--you want a combination of installment loans, revolving credit with balances (again below 30% of your credit limit).
Things that also negatively affect credit scores are (but not limited to): collections, foreclosures, short sales,Â and bankruptcies.
Your credit score doesn't have to be a mystery. Knowing little things you can do to boost your score can help you a lot when you're buying a home. A good resource for credit counseling is Advantage Credit, Inc. Credit Reporting Services
For more information on buying and selling homes in Flagstaff, Arizona I would be happy to make your transition easier and more efficient!