At this point, we all know how important credit is, but what actually goes into a credit score? Today, I’ll break down your credit score and offer some money saving tips.
First, 10% of your credit score is new debt. I know a guy who who filled out 20 credit applications. Each new credit he added lowered his credit score more and more. By the time he got to the last five applications, he was denied because his credit score dropped 150 points. The lesson here is to not acquire a lot of new debt at once.
Another 10% of your credit score is made up of varying types of credit, like auto loans, mortgages, credit cards, or lines of credit with department stores. Payment history makes up 35% of your credit score, so make sure you make payments on time.
Length of credit history factors in too. Someone with 60 years of credit will have a better score than someone with one year of credit history.
Finally, 30% of your credit score is your debt to income ratio. If you make $100 a month, you don’t want to spend $90 towards debt; $30 towards debt is a much healthier ratio.
So if you’ve spent too much this holiday season, make your payments on time. If you haven’t spent too much, good for you!
A good credit score goes a long way in the real estate market. If you have any questions, give me a call or send me an email. I would be happy to help you!