Your Credit Report – What You Need to Know
Everything You Need To Know About Your Credit Report
Your credit report is a snapshot of your financial history. It lists your lines of credit, payment history, public records, and collection accounts. Your credit report may also contain a credit score. The higher the number, the lower the risk to the lender.
Your credit score is weighted and based on these five categories:
- 35% – On Time Payments
- 30% – Debt Load
- 15% – Credit History
- 10% – Types of Credit
- 10% – Credit Inquiries
On Time Payments – This category carries the largest impact to your credit score. The purpose of your credit score is to evaluate your risk as a borrower. If you make a late payment, it hurts your credit score. The impact of the late or missed payment is lessened over time as long as the account is brought current.
Debt Load – This category measures the amount of debt you are carrying on revolving accounts, installment loans, and all balances. Having too much debt and maxed out accounts hurts your score. The best way to improve your score in this category is to pay it down. It is generally a good idea to keep balances below 30% of the credit limit.
Credit History – This category measures the age of your accounts. Several new accounts could indicate some risk. Advice here is to keep old accounts open and to avoid shuffling balances from old accounts to new.
Types of Credit – The advice in this category is to utilize one mortgage, 1-2 installment loans, and 3 revolving accounts that are open and in use. Anything beyond that carries a risk of hurting your score in this area.
Credit Inquiries – This category measures the number of “hard” credit inquiries. Those inquiries are usually the ones you are aware of because you are asking for credit. The inquiries you did not authorize such as those listed as “pre-screened” or “pre-authorization” do not affect your report.
For more information about your credit report contact us.