Your Credit Score And Three Things You May Not Know That Can Cause It To DecreaseMay 19, 2010 - 2:00 am
Would you like to save 20% off your purchase today and open an account with us? Simple questions and seemingly great opportunities are not all they appear to be. Did you know that every time you fill out credit card applications, points drop from your credit, lowering your score and compromising your overall credit worthiness? This score is the numerical value given to the consumer representing creditworthiness. It determines how much risk the consumer is to the lender. Higher numbers indicate good credit while lower numbers reflect poorly.
Payment history factors nearly 35% of the score’s equation. Determined by using payment dates, frequency of payment and delinquencies, amounts due, public records, collection agencies and how recent each reported item is. It’s common to think of major credit cards and lending intuitions as creditors; however, your credit score is impacted by more than just banks. Legal liens, wage assignments, and other pubic records all contribute to the credit bureau’s report.
Paying bills on time goes without saying. However, if you are paying your bill and not paying attention, there may be more impacting your score than your payment history. Accounting for nearly 30% of your score, the debt to available credit has quite an impact. Lenders report monthly how much debt is carried.
For example: on Jan 1st your card balance is $0. By Jan 12th the balance is $4,250. Your bill is not due until Feb 1st, thinking nothing of the high balance, knowing you will pay it off by Feb 1st, you assume you are doing great. On Jan 14th, your credit company reports a debt of $4,250, your credit limit is $5,000.00. The Credit Bureau sees the debt and considers you a risk. Make payments on time, and make them before your credit company reports to the bureau.
It’s true; many things are better with age. The same can be said of credit. Lenders have a better idea of the borrower’s behavior when there is established time behind an account. New and few accounts are risky, they provide little to no information on how the individual or business handles debt. Thus, lenders treat new and few credit accounts as a risk factoring nearly 15% of the overall FICO score.
Credit companies examine a lot of factors when determining credit worthiness. From the amount of credit card applications to the newness of the accounts covering nearly 80% of our credit scores, we as consumers have a lot of control. Armed with the right information, becoming part of the top 20% of consumers with a FICO of 720+ becomes less of a fantasy and more of a reality. Check your credit score today.