A recent report by FICO shows more than 25% of Americans have a credit score lower than 599. With a credit score that low, it makes it very difficult to take advantage of the current record-low interest rates. Below are the main factors, and the percentage of importance of each, that are used to determine your credit score.
1. Payment history = 35% – The most important thing is to pay your bills on time.
2. Amounts owed = 30% – This is the amount of money you owe versus the amount of credit you have available to you. A 20% debt-to-credit limit ratio is optimal.
3. Credit history = 15% – It’s better to keep old credit accounts than to close them.
4. New credit = 10% – Don’t apply for new credit without a good reason.
5. Credit mix = 10% – Try having a good mix of credit, such as credit cards, retail accounts, mortgage, installment loans, and consumer finance accounts.
Thursday, August 5, 2010
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