Credit Rating Blog

Yesterday I wrote about who can look at your credit score (so make sure it’s always pretty).

Today, I’m going to touch on what makes up your credit score to give you a better idea of what you need to do to keep it in the A-OK range, OK? There are 5 categories that go into your credit score:

1. Payment History – 35%
2. Total Amounts Owed – 30%
3. Length of Credit History – 15%
4. New Credit -10%
5. Type of Credit I Use – 10%

Now that you have this morsel of information in front of you, what does it mean? Well, you can see that your history (i.e. paying your bill on time) is the most important, so keep that up. Then, your credit score takes into account just how much debt you’re in. So, the higher the amount you owe (this is debt in general) the lower your score will be compared with your payment history.

Now, if you’re a student you don’t have a long credit history, and, if you’re responsible, you don’t have a lot of debt yet either (besides student debt which I’ve written about in a previous blog, that’s the good kind of debt). Ergo, your score shouldn’t suffer from your history and the amount you currently owe.

Let’s look at ‘New Credit.’ If you’ve got some loan debt and one or two student credit cards with low balances and paying your bill on time, you’re doing GREAT! But, if you keep applying for credit cards or credit accounts one right after the other, that looks bad. Your score will probably lower with the more accounts you open.

Finally, the type of credit you use is considered. This I will address in my next installment.