The Five Essential Elements Of Your Credit Score

There are five essential elements that make up your credit score.  Below you will see them listed starting with the element that has the most impact.

Payment History - 35% Impact

Paying your debt on time is a must if you want to maximize your credit rating.  Late payments, collection accounts, charge offs and judgments have a negative impact on your credit rating.  Negative marks on your credit have the most impact on your credit rating for the immediate 24 months from which it was reported.  After 24 months it has less impact on your credit rating.

Outstanding Credit Balances - 30% Impact

This element of your credit rating takes into account the ratio of your current balance versus your available credit limit.  To maximize your credit rating you want your balances to be 10% or less of your credit limit.  Where your credit rating starts to really lose points is when your balances go over 50% of your credit limit.  Once you reach 100% or go beyond you are losing a significant amount of points off your credit score.

Credit History - 15% Impact

This element of your credit rating establishes the length of time since a particular credit account was opened.  The older the credit account the more points you will receive toward your credit score.

Inquiries - 10% Impact

This element of your credit rating totals the number of companies that have inquired about your credit history within the last 6 months.  Each hard inquiry (when looking to open a new credit source) can cost your credit score from 2 to 50 points on your credit score, up to 10 inquiries.  Any inquiry over 10 will no longer have an impact on your credit score.

Type of Credit - 10% Impact

This element of your credit rating looks at the mix of credit you have between auto loans, mortgages, student loans, personal loans and credit cards.  The more diverse your credit mix the better your credit rating will be versus just having credit card debt.

When your credit is pulled it is a summary of what your credit looks like that day.  Your credit rating can fluctuate greatly from a week to week basis based on all of the factors above.

Before considering any major financing it is highly recommended that you talk to a credit expert before making any major purchases or closing any credit card accounts.

Once per year you are eligible to get a free credit report.  Below you will find the link to the ONLY free credit report you can get.  All other offers of "free" credit reports have an offer to them that is being disguised in the advertising:

www.AnnualCreditReport.com

The websites for the three major credit reporting agencies are listed below:

www.TransUnion.com

www.Experian.com

www.Equifax.com

These are the actual sites you would go to to purchase acopy of your credit bureau if you wanted to dispute any items found on your credit bureau.