Credit Score Components

Your credit score affects your ability to get a mortgage. Do you know what makes up your credit score? What about your credit history? No, these aren't questions you should be afraid to ask. It's important you understand what makes up that magic three-digit number when it comes to borrowing money — because the better you understand it, the more likely you can improve it!

10% CREDIT MIX - Credit scores will consider your mix of credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans. Don't worry, it's not necessary to have one of each.

10% NEW CREDIT - Research shows that opening several credit accounts in a short amount of time represents a greater risk, especially for people who don't have a long credit history.

15% CREDIT HISTORY LENGTH - In general, a longer credit history will increase your credit score. Your credit score takes into account: how long your credit accounts have been opened, how long the credit account has been established, and how long it has been since you used your accounts.

35% PAYMENT HISTORY - The first thing any lender wants to know is whether you've paid past credit accounts on time. This helps a lender figure out the amount of risk it will take on when extending credit. This is the most important factor in a credit score.' Be sure to keep your accounts in good standing to build a healthy history.

30% AMOUNT OWED - If you are using a lot of your available credit, this may indicate that you are, overextended-and banks can interpret this to mean that you are at a higher risk of defaulting.

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