What really impacts your credit score and how?

 

Well Your FICO credit score, reflects your credit report, that is what banks and other lenders use to determine how credit-worthy you are. If you have a high score, then you have access to better credit cards, insurance, and loan rates as well as other perks. FICO scores range between 300 and 850, and a “good” score is considered anything above 700. An “excellent” rate of 750 or higher will secure you the best interest rates on loans, while falling below 650 could mean higher interest rate.

Carrying a balance on your credit card doesn’t increase your credit score. (sorry to bust your bubble)

Over the years I have heard people say that the best way to build up your credit score is by carrying a balance.  As you can see, I also did listen to that advice and instead of accomplishing to get a better score I ended up losing money, my credit score got worse, and ended up with huge credit card debt….nice  Many people like me believe this myth to be true. But later, I understood that this is not the way to build my credit score.  

It’s a common misconception, that people believe carrying on a balance would help them with their credit score. According to a 2018 survey from CreditCards.com, they found out people who carry a credit card balance, 22% of people did it because they believed it would help their credit score.

But, carrying a balance on your credit card doesn’t increase your score, it just means you’ll pay more money long term as your interest payments build. Also, according to an article on creditcards.com they have reported a record high with interest rate currently at 17.30%. As you can see this myth is costly. But The best way to use a credit card is to make purchases during the month and then pay it off in full before the statement is due. That way you not only build credit history, but you won’t be paying that costly interest. This also helps take advantage of the credit card point reward or cash back system. This can help you save hundreds at the end of the year. Trust me I have been using this system for a year and I have been able to save.

How your credit score is determined

So According to creditcard.com Your score is determined by five factors, all of which are weighted differently. The most important factor that you must pay the most attention to is your payment history, which make up 35% of your credit score. If you make on-time payments every month, your score will improve. If you don’t, your score will drop like a fly. Taking a huge impact on your credit scored and that’s one of the thing you really don’t want.

The second most important factor is your credit utilization rate, or how much of your credit line you’re using at one time. This Makes up 30% of your score. Many Experts advise keeping it below 30% to maximize your score. So, for example, let’s say your credit limit is $5,000, you’ll want to put no more than $1,500 on your card. Remember That way your credit score doesn’t take a hit for going over the 30%. Also, the length of your credit history, your mix of credit accounts, and the last time you applied for new credit are also factored into your score. Be mindful of that.

bruiz_@brianruiz1523