4 Things You Need to Know About Your Credit Score

Whenever you hear people talk about credit, you often hear about credit scores.  We all know that this is a ranking system of your credit history that helps you when you try to buy or lease certain items, but what exactly does it entail?  Here are four things you should know about your credit score.

The 5 Factors

Everyone’s credit score is based on five different factors.  Changing anything in any one of these categories can result in your credit score going lower or higher.  You generally want a credit score of at least a 700 to be in the “good” category.  Here are the five factors that affect your score:

• Payment history – Do you pay your bills on time?  If so, there is a good chance you have a decent credit score.
• Amount of debt – Having a large debt to credit ratio can make your score lower.
• Length of credit history – The longer you’ve had credit, especially good credit, the better for your score.
• Types of credit – Your credit score can be affected by the type of credit lines you have open as well as the type of debt you have incurred.  
• Your history of credit searches – Unfortunately, if too many lenders do a search for your credit score or history, it can negatively affect your score.

Reports vs. Scores

There is a difference between your credit report and your credit score.  Your credit report includes how often you apply for credit, your debt collection accounts, all the details of your credit accounts, and possibly some public records.  Your credit score is calculated using the information on your credit report.

Checking Won’t Hurt

You can check your own credit score without any penalty on your overall score.  It’s only when lenders check your credit as you apply for a loan or a credit card that your score can be affected.  Just don’t have too many lenders check too often, and you should be ok.

Negative is Only Temporary

If you have a factor that has negatively impacted your credit score, there is good news!  It will eventually age off.  Some things, like bankruptcy, can take many years to age off.  However, it depends on what kind of negative factor you have.  Just know that if you keep a clean record after, you can improve your credit score over time.

So you see, there are many different details about your credit score that are never really talked about.  It’s good for you to stay informed on your credit score and the factors that go into keeping it healthy.

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