Jed’s Corner – How Your Credit Score Is Factored
Members frequently ask, “What can I do to increase my credit score?”
The FICO scoring model has a credit range from 300-850. Your credit file is composed of revolving credit, consisting of credit and department store cards, and installment credit types like auto, mortgage, and personal loans.
Your actual credit score is determined by the following: the amount you owe versus your credit limit and loan amounts. This is referred to as credit utilization and accounts for 30% of your credit score.
10% of your credit score is determined by new credit or loans recently taken out. 15% is derived from the longevity of your credit history. The longer a loan is open in your credit file with positive payment history, the higher it drives your credit score. This factor is one of the strongest indicators lenders look for in the underwriting of a loan request. Having a good mix of revolving and installment credit accounts for 10% of your score.
The final factor in determining your credit score is your payment history. This accounts for 35% of your score and is the most crucial part of the overall matrix. On-time payments are crucial as one late payment can drastically reduce your credit score and take months of positive payment history to correct.
Tips for increasing your credit score:
- Always pay your credit cards and installment loans on time.
- With credit utilization, keep your balances below 30% of your credit limit.
- Don’t apply for credit checks unless it is necessary. Inquiries can decrease your credit score
Once a year, you can obtain a free copy of your credit report from all 3 reporting agencies:
www.equifax.com 1-888-548-7878
www.transunion.com 1-800-916-8800
www.experian.com 1-888-397-3742
You can also visit www.annualcreditreport.com
If you have any specific questions, please feel free to go to our website and click on the “Ask Louisiana USA’’ section. Remember, good credit is the key to your financial future and Louisiana USA wants to help you every step of the way.
