What You Should Know About Your Credit Bureau

• December 1, 2017

Many people find themselves with very low credit scores, yet they have been diligent in meeting all their monthly payment obligations, and they don’t have any significant outstanding debts, which may have an impact on their credit.

Sometimes the problem is not concerning your payment obligations. It is important to understand the matrix used by the bureaus to arrive at your credit score. Here are some of the things you need to know in this regard.

In the determination of your credit score, 35% of your score is normally based on your repayment history. It implies that if you are always prompt with your repayments, then you can be sure that your score won’t go below this figure.

The next 30% of your score comes from your credit utilization. If you happen to have a favorite credit card you prefer using, so as to earn points with it, you need to be careful with it since it may work against you. This is because the more you use it, the more it affects your score negatively.

About 15% of your score comes from your balance to limit ratio. In most cases, you will be safe when you have a balance of above 50%. If you love making lots of inquiries, then you should stop immediately because 10% of your score will be evaluated from the number of inquiries you make. But if you are making inquiries for mortgage shopping, you will have a 30 day grace period, so you do not have to worry about it.

Finally, the last 10% comes from the type of credit you have. For instance, if you have a bank credit, you may get a more favorable score, compared to having a department store card.

With the above factors in mind, you should aim to keep your balance to limit ratio above 50%, don’t default on your monthly payments, and limit the number of inquiries you make. In this manner, you will be guaranteed a healthy score all the time.