What Makes Up Your Credit Score
If you don’t have any idea what goes into your credit score, you can’t do much about it. If you know what elements go into coming up with it and how it is calculated makes it possible for you to have more control over your financial status.
1. The most significant part of your credit score will have your history of making payments as a basis. This accounts for 35% of your total credit score. Then, if you have an impeccable record of prompt payments, then this is actually good news. Nevertheless, if you always forget to pay a bill, then it would be otherwise.
2. Your blend of credit makes up 10% of your score. Having a mortgage, car loan, credit card and maybe a store account that you pay on is a sign to the agencies that you can handle different credit options. See to it that you can handle all of them, though, given that not paying on time on even one type can count against you.
3. 15% of your credit score will be determined depending on how long you have had a credit history. Certainly, the better you have handled that credit in the past years, the better it will be for your score. However, it would still be better to have a more established credit record than a shorter one.
4. Second in weight to your payment history will be the total amount of your debt. This factor makes up for 30% of your score. The debt you owe is compared to your income in what is called the “debt to income” ratio. The lower it is, the better. You must target keeping your total debt at 25% or less of your annual income to have the best effect on your rating.
5. New inquiries into your credit can be an indication that you may be overextending yourself and account for 10% of your total score. The one exception will be the case wherein you are the one looking at your credit report.
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Does it affect your credit score to close an account while still owing money on it?
Question by CaliGirl: Does it affect your credit score to close an account while still owing money on it?
I joined a DMP (debt management program) they are a great team and i am making a difference in lowering my debt little by little. However, i noticed on my credit report a couple days ago that many of those accounts that i have on the DMP are still “open”. I called and they advised me not to close them as this would affect my credit score- “having a credit card closed while still owing money”. But i figure if i am still making my payments on time does it really matter? Also, i thought it would help closing the account since my “open account” number would fall. Any advice??? Thank you!
Best answer:
Answer by mscarriem
The reason you want to leave the accounts open is your credit score is based 35% on credit available. If you close the account with a balance you now owe money on a credit account you can not use at all. They are correct in advising you to leave the accounts open. Once they are paid in full you could close them, but now you would have credit available which as I stated will elevate your score.
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