Credit Tips: Part 5

Once Upon A Time... continued

That sounds like a good way to start a story ~ Let's call it your Credit Story.

There are 5 Major Factors that Make Up a Credit Score:

1. Payment History
2. Credit Usage
3. Credit Age
4. Mix of Credit
5. Inquiries

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Keep in mind, that Credit doesn't make a lot of sense.  If you remember that, try not to argue and shake your head often, you'll be way ahead of the game.  :-)

Let's Continue the Story with #4 and #5

Mix of Credit and Credit Inquiries

• The Main 3 are Revolving, Installment and Mortgage
  1. Revolving is usually Credit Cards
  2. Installment is usually auto or student loans
  3. Mortgage is related to a home loan

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About 11% of your credit score is based on the mix of these accounts.  Your score will likely be higher, if you have experience with different types of credit.  A mix of installment and revolving accounts is better than having only one type of debt.  Also avoid have any accounts in collections.  That phone bill you fought about with your roommate or sibling can and will come back to haunt you.  Just pay it and argue later.  Trust me, it's not worth it when it shows up just in time to mess up your first home purchase!

Inquiries:  This is the one that gets everyone in a huff.  Yes, your score may drop if you have several inquiries.  Truthfully, it doesn't matter too much IF you're not one the edge of NOT qualifying.  You really have no choice but to have your credit ran, if you want to be prequalified for the loan.  It's only 5% and ~ A NEW LINE OF CREDIT IS CONSIDERED NEW FOR 24 MONTHS.  So, when I trade a vehicle in every couple years - those are all considered NEW lines of credit EVEN THOUGH I have never made a late payment and have used the same credit union nearly every time.  No, I am not joking.  Relax.  I promise a good lender will let you know, just be honest and ask questions!

That wraps up our 5 biggest influences on your credit score.  I hope I was able to give you some insight to building or even fixing your credit.  Like it or not, our credit score is pretty darn important in the overall scheme of things.  If you care to comment or have questions, I'd be happy to try to help or point you in the direction of other resources.

REMEMBER:  It only takes a few mistakes to screw up your credit ~ but it takes a really long time to get it back!