The Credit Scoring System
Knowing your credit score is not enough. You need to learn how to read and understand a credit report. A credit report is consists of four sections and these are identifying information which is your personal record, credit history, public records if you have any legal proceedings, and inquiries – your new applications for credit.
The record of timely payment on loans makes up 35% of your credit score. Generally, this is your payment history made up of all your payments on things like credit cards, utility bills, car loans, etc.
The types of debts and the total outstanding balance composes 30% of your credit score. Another way to understand this component is to answer the question, how much credit you use. If you have a $15,000 credit limit on your credit card, do you use it every month or charge only thousands on it. Experts recommend that you only use 30% of your available credit to maximize credit score.
The length of credit history is 15% of your credit score. This credit history includes things like credit cards, mortgage, auto loans, etc. Credit bureaus are looking at the overall age and length of time that you have been in their system. Take note that a great payment history doesn’t mean a whole lot, if the history only spans a six month period.
Types of credit used. The mix of credit accounts is just 10% of your credit score. This verifies the borrower’s ‘financial experience’ with different types of credit especially if they had success in managing a mortgage, credit, and other types of loans.
Applications for new credit/Number and types of accounts opened recently makes up 10% of your credit score.
A better understanding of credit score and credit report will guide a homeowner to make better financial decisions in his Homes Listings in Aurora CO. To make sure that you always fall on having an excellent credit score, pay on time and limit the amount of credit you use at one time.
If you have plans in buying a property at Thornton CO Homes for Sale, know your credit score first. Knowing what your credit score means puts you in the advantage position and allows you to make better decisions whether to pursue your dream of buying Foreclosures in Denver CO or wait to build your credit score higher.
