Скачать или смотреть How Credit Scores Work | Credit Score Bands Explained

I’m going to talk about how credit scores are calculated, what factors impact credit scores and how they might impact you. As you maintain your finances and manage your expenses, keep an eye on your credit score. Some of the reasons to monitor your credit score are so you can take out a mortgage if you plan on buying a home in the future or even refinancing if you already purchased a home, rent somewhere to live, take out a car loan or apply for new credit cards. It partially allows you to borrow money at all points during our lifetime, but it's most important when you’re young and trying to build wealth or start a family.

Your credit score is made up of:
35% payment history
30% amount you owe/Utilization ratio
15% length of credit history
10% types of credit you have/credit mix
10% new credit opened

Payment history. If you’re looking to borrow money, there needs to be some proof that you can pay it back, otherwise why would they lend it to you? Your payment history includes things like credit cards, department store accounts, personal loans, car loans, student loans, home equity loans and mortgage loans. Your payment history will also show a lender details on any late or missed payments, bankruptcies, foreclosures and collection information. Your payment history will look at how many have been delinquent in relation to your total amount of accounts.

The amount you owe or utilization ratio. Think of this as how much of your available credit you use vs. don’t use. Typically lenders like to see that you are being responsible with the credit available to you. The general rule of thumb with utilization ratio is to stay below 30 percent of your available credit limit, anything higher will impact your credit score. This applies to each credit card and your total utilization ratio.

The length of your credit history. This details how long various different credit accounts have been active. It takes into consideration both how long your oldest and most recent accounts have been open. Lenders like to see that you have a history of paying off your credit accounts on time, which will increase your credit score.

Types of credit/credit mix. Your credit mix will consist of various credit cards, retail accounts, personal loans, student loans and mortgage loans. There is no need to have one of each type, but lenders like to see that you can manage accounts of different types and multiple types of credit.

New credit opened. If you’re opening too many credit accounts in a short amount of time, it is a sign that you could be grasping for credit. Hard Inquiries can happen if you apply for credit and the lender checks your credit in response to your application or request for credit. There are also soft inquiries like when you check your own credit score or get a pre-approved credit offer from somewhere you already have an existing account. Soft inquiries do not impact your credit score and are not visible to lenders that check your credit report.

There are 2 primary scoring methods to calculate credit scores, FICO score, and vantage score. Each of them ranks the 5 categories slightly differently in terms of what is more or less influential as part of their scoring system. This is the reason why you can check your credit score and it can be different depending on which score is being used. Credit Score bands go from exceptional, very good, good, fair, risky.

Know what your credit score is before making big purchases to be able to negotiate for better interest rates. If you’re trying to build credit or trying to help someone else build credit, becoming or adding an authorized user to a credit card builds credit when the primary account holder is responsible in paying off that credit card by making on-time payments and paying off balances in full. If adding or becoming an authorized user isn’t an option, getting a secured card is a good alternative. Secured cards are meant to help people that either have low credit or no credit history at all. A small deposit is required in exchange for a small line of credit of around a hundred or couple hundred dollars, the deposit is usually equivalent to the line of credit that is offered.


Please Subscribe to Financial Fitness below:    / @financialfitness8  

Disclaimer: This is not a sponsored video.
The ideas, contents and opinions presented in this video are for entertainment purposes only. Bryan does not give tax or investment advice. All information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor. Past performance is not indicative of future results. All investing involves risk, including the possible loss of principal. Bryan is not a Financial Advisor, Tax Advisor or CPA/Accountant. Only you are responsible for the financial decisions that YOU make.

For business inquiries: [email protected]