How to Maintain Good Credit

The way credit is treated in America you would think there is a secret sauce that goes into its making but the recipe for credit success isn’t as complicated as you’d think. Consumers are directly handed the components that make up credit scores and that knowledge is both public and has been made available to consumers. It there’s for you study, you just need to take advantage of it.

Credit Diversity

Credit diversity makes up 10% of a consumer’s given credit score. The more diverse your credit portfolio the more likely you will have this portion of your credit score covered. So, if you have secured accounts on your credit portfolio and you have unsecured accounts you will most likely have diverse credit. Consumers with the most diverse credit will have accounts that carry credit cards, personal loans, auto loans, secured home loans, etc. The more diversity in your credit the better it is and the more likely you are to have this portion of the credit score covered.

Utilization Rate

The utilization rate accounts for 30% of the credit score and is the second largest factor that compromises of your score. The utilization rate is simply the reported balance divided by the credit limit. You get this rate by multiplying the fraction by 100. The lower the utilization rate the better it is for your credit score. Consumers with very low utilization rates typically tend to have the highest credit scores because they only use a small percentage of the credit that is available to them.

Payment History

Payment history accounts for 35% of the consumers credit worthiness and is the most important factor regarding credit worthiness. This is the most important factor regarding your credit score. If you miss payments for 30 days or more this will heavily factor against your credit score and leave a negative remark on your credit report. Making on time payments to your debt obligations is a very important part of maintaining good credit.

Length of Established Lines of Credit

The length of your credit history makes up 15% of your credit score. The longer the length of the time the credit card accounts have been established the better the credit score will be. If you have accounts that have established lines of credit for years you will surely see a benefit from them in terms of your credit worthiness. The longer you’ve made timely payments to a credit card account and have established lines of credit the better it will be for your score.

New Credit

The last factor that makes up your credit score is going to be new credit accounts. New credit accounts for 10% for your total credit score. What it’s referring to is the rate and recentness of your last opened accounts. If you recently opened up many new lines of credit this will negatively impact your score. This also goes for inquiries, lenders don’t want to see too many new inquiries as this might show that you are credit seeking.

In order to maintain good credit or even excellent credit you need to pay attention to all of these factors and make sure you’re hitting the nail on the head for all of them. All in all, when you focus on all points that compromise your credit score, you’ll be all the better for it and you’ll be a more credit worthy individual.