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Q.What lowers a credit score?
A.Your credit score (also known as your FICO Score) determines how much you can borrow and at what rate. Your credit score can range anywhere from 300 to 850, and anything above 750 is considered excellent.
First, let’s set the record straight with what won’t lower your credit score:
- Checking your own credit
- Shopping for the best loan rate, if the multiple inquiries are made within the same 14 day period
- Credit card offers sent in the mail
Now lets identify the five major factors that make up your credit score:
- Your Payment history makes up about 35% of your score;
- The Amounts you owe (your debt) makes up about 30% of your score;
- The length of your credit history makes up about 15% of your score;
- Newly opened credit accounts (within the past two years) make up about 10% of your score; and
- The Type of credit you use makes up about 10% of your credit score.
Because your payment history is the single largest component of your credit score, failing to pay your bills on time, and/or allowing accounts to become delinquent, will do a lot of damage. Points are also added and subtracted based on your amount of available credit. Using a large percentage of your available credit, even if paid in full at the end of every month, can lower your credit score. And as most of you know, filing for bankruptcy, going into foreclosure, and an unpaid judgment call all do serious damage as well.
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