Credit Score Composition

    35% Payment History

• NEVER CLOSE REVOLVING ACCOUNTS – the more history your account has the better they will score
• Do not try to pay off auto loans or student loans early, make the minimum payments and keep the loans for the entire term of the loan
• To help build your credit you may add yourself as an authorized user to others accounts: The way the bureaus report your scores does not distinguish between a primary cardholder or an authorized user, so find a friend or relative who has a credit card which has been open and actively used for several years (the longer the better) with a low balance and a high credit limit and with perfect payment history.

    30% Balances on your revolving debt (credit cards)

• Revolving credit cards make up a very significant portion of what determines your credit score
• KEEP BALANCES AT 40% OR LESS on revolving accounts (credit cards)
• If you have a high balance on a credit card but cannot afford to pay down the balance then inquire with the credit card company into receiving a higher credit limit – CAUTION: approach this option with due care, insist that the credit card company base their decision for a higher limit on your past payment history only, do not allow them to pull your credit as this may damage your score more than help!

    15% Age/History of Accounts

• Revolving accounts (credit cards) that score the highest points from the credit bureaus are those that are 5 years or older, that have limits of $5,000 or more, and that have balances of 40% of the credit limit or less
• Do not close old accounts, keep them active – this means purchase a tank of gas or pay for groceries on the account once a month but do not pay off the balance, instead make minimum payments to keep a revolving balance
• All new consumer and revolving accounts opened drop your score for the first six months (new mortgages and auto loans especially) as it generally takes at least six months to rate the payment history of a new account

    10% Credit Inquiries

• You are allowed one free credit inquiry from all three credit bureaus once a year without the inquiries hurting your score
• When shopping for a new mortgage or automobile, consumers are allowed to have their credit checked up to 20 times within a thirty day period as long as a new mortgage or auto loan is added to their credit within that time period, if not, then each credit inquiry will diminish your score by up to 8 points each
• If you have inquire into your credit more than four times a year then the credit bureaus will deem your account as high risk as they will believe that you are seeking credit counseling or going through financial hardships

    10% Mix of trade lines

• The credit bureaus want to see that savvy consumers are rewarded versus frivolous spenders. In other words, the bureaus are looking for a good mix of trade lines on your credit report i.e., more major credit cards than small department store cards, keep institutional loans (auto loans, student loans, etc.) for the full term of the loan, and do not co-sign for friends or relatives.