Credit Limit

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How Long Have You Had Credit? It Matters to Your Score

by Miranda Marquit on January 25, 2011

If you are working to improve your credit score, it is vital that you know exactly factors influence the outcome. While providers of different financial products and services have their own variations of the credit score, and tweaks to the formula, overall there are some things you can expect. The most important aspects of your credit score are your payment history and your credit utilization. Together, these items account for 65% of your credit score. The next largest chunk is the length of your credit history, which accounts for 15% of your credit score.

Length of Credit History Matters

While the length of your credit history isn’t weighed as heavily as payment history or credit utilization, 15% isn’t something to sneeze at. Indeed, if you are just on the cusp between fair credit and good credit, your history could mean something. The length of credit history is one of the reasons I still have my first credit card — even though it is a student credit card that doesn’t offer rewards, and that has a little higher interest rate than my other cards.
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Categories: Credit Report, Credit Score

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Credit Utilization: Another Important Part of Your Credit Score

by Miranda Marquit on January 20, 2011

A couple of days ago, I addressed the importance of making on-time credit payments. Your payment history accounts for about 35% of your FICO credit score. However, payment history is closely followed in importance by your credit utilization. Your credit utilization accounts for about 30% of your credit score. This means that if you want to have a good score, you will need to pay attention to how much of your available credit you are using.


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Categories: Credit Report, Credit Score

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Credit Cards and Your Credit Score

by Kerri Spencer on July 14, 2010

When it comes to your credit score, you can’t be too careful. Your credit score will determine a lot of things in your life. Not only will it determine how big of a house you can buy, in some places it might even determine how much you pay for your car insurance premiums or whether or not you get a job.

Credit cards are one important factor in your credit cards. Some folks will tell you that, if you want to have a good credit score, you need to use your credit cards. This isn’t exactly true. In fact, it’s really not true at all.

To have a good credit score, you need to pay your bills on time. That’s the number one way to improve your credit score. Having a zero balance on your credit cards in and of itself doesn’t help nearly as much as paying your bills on time. Those late payments can show up on your credit report and will remain a blemish for years.

There’s another way that credit cards can affect your credit score, and that’s in the area of something known as your “utilization ratio.” This is the amount of money that you have as available credit compared to the balance on your credit card. If you have a credit limit of $10,000, for example, and you carry a balance of $3,000, you have a ratio of 30%. This is a good number, although lower is always better. If you can help it, don’t go above 30%.

In this regard, it can be good to have a zero balance on your credit cards. The main thing is that you do what you need to do to keep the cards open and active. That might mean making a few small purchases throughout the year, and paying off the balance at the end of each month.

Your credit cards matter to your credit score in another way. If all of your credit is revolving credit, such as with credit cards, you’re not going to have as good a score as if you have more diversified credit. Having a car loan or home loan along with those credit cards will be a more ideal mix, and will help your credit score.

Categories: Advice, Credit Score