The list below gives you an idea of how various aspects of your credit history affect your credit score.  You will also be given some tips and pointers to help you maintain and  improve your credit score.

1.) Current Credit Balances

Outstanding balances have a 30% impact. What they are really looking at is your credit to debt ratio. Which is how much your current balance is versus how much your maximum credit limit.

For example if you have a credit card balance of $3000.00 and your maximum credit limit is $5000.00. Your credit to debt ratio is $3000/$5000  or 60%.

They take all of your ratios and average them for your cumulative debt ratio.  So you may have 60% on one card and 20% on another and the cumulative debt ratio will be 40%. Keeping your credit to debt ration below 50% is wise and below 30% is better.

TIP– Despite what you may have heard; it’s never a good idea to close an account. When credit bureaus or Mortgage lenders look at your credit history they are looking at 2 things.  First they want to see how long you have had your credit card or other credit.  The older the card the more “seasoned” your credit is and that’s a good thing.  Also closing an account with a low or zero balance will increase your cumulative  Debt ratio. So keep it open and don’t use it or keep a very low balance on it. It will help you ratio!

2. Payment History

Payment History has a 35% impact on your score. Paying your debt on time and in full has a positive impact.  Having late payments, judgements and charge-offs have a negative impact.

3. Credit History

The length of time each of your credit lines has been open has a 15% impact on your score. It shows your stability.

4. Type of Credit

Type of credit has a 10% impact on your score.  It’s good to have a mix of credit, such as auto loans, credit cards and a mortgage.  A concentration of only credit card debt is looked upon less favorably.

5. Credit Inquiries

When you apply for credit there is a credit inquiry. Inquiries have a 10% impact on credit.

NOTE: Auto and Mortgage inquiries receive a special treatment:  20 inquiries can be made in a 14 day period for auto or mortgage and they will be treated as only 1 inquiry. This allows you to shop around for the best interest rates and fees.

The maximum number of inquiries that will reduce your credit score is 10.  Each hard inquiry can cost between 2 & 50 points on a credit score.

TIP: When purchasing a home your credit is checked at least twice by your mortgage lender:  At the beginning of the transaction when you submit your application and then several days before closing.  Don’t by anything on credit or open any new credit lines before closing.  This will change your credit score and could cause your loan to be declined.

FYI – Checking your own credit is call a soft inquiry and will not harm your credit score.