Chances are if a commercial comes on for a free credit score website you can sing along with whatever gimmicky song appears in the commercial. Yes, we’ve been saturated with credit score commercials enough now to know that our credit score is indeed important. But many of us may not know exactly how our credit score is affected by what we do, or how we can improve our credit score.
Well, Iowa State Bank is here to help sort out the confusion and mystery behind the credit score and how you can go from a bad score to one more worthy of interest on the part of lenders.
What Goes into a Credit Score?
A credit score is made up of five factors, with certain factors carrying more weight than others:
- Payment history (35%)- are you late with credit card or other debt payments, or have you missed payments? If so, those are a major stain on your record.
- Outstanding debt (30%)- how many accounts have balances, and how large are those balances? Also, how close are you the credit limit for each account?
- Credit history (15%)- how long have you had a credit history, and how frequently do you use each account?
- Pursuit of new credit (10%)- this factor looks at any new credit requests you’ve made, the number of new accounts you’ve opened and the time period each account is open.
- Types of credit in use (10%)- how many different types of credit do you use (installment loans, credit cards, etc.)?
How Can I Increase My Score
There is no magic formula and major improvement takes time. Start out by not missing any payments and checking your credit limits. If you have existing credit card debt, that needs to be paid down. If you don’t have a credit card, apply for one and use it lightly, such as only to fill up for gas every week.
An improved credit score means you get better rates on everything from mortgages and credit cards to loans. By using these tips from Iowa State Bank you can put yourself on the right track to improving your credit score today.