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Creditscoreinsight.com gave a detailed breakdown of how a credit score is tabulated.
Payment history accounts for 35 percent, how much a person owes is 30 percent, credit history is 15 percent, applications for credit is 10 percent and an individual’s credit mix is 10 percent.
“Thirty-percent is your debt to credit ratio,” Bowman mentioned. “This is basically how much your spending limit is. I generally tell people to stay under 65 percent, but closer to zero is better. A good example is if you had a credit card with a limit of $1,000 on it. You want to keep the money to less than 65 percent of that total. Pay a $100 here and there if you can to keep the balance down.”
Another example that Bowman gave was the total package of credit listed on your report.
She suggested a good mix of credit is a mortgage, an installment loan and a couple credit cards.
“But remember to use those credit cards responsibly,” Bowman explained. “The age of your accounts is something to remember also. Keep the older cards that are paid off as active in your credit report. It shows lenders the longevity of your credit history. How you utilize those cards is very important.”
A lender’s responsibility is to help in any way they can to assist someone with building up their credit.
According to Bowman, when someone comes to the bank to borrow money, she will try to find the root of the problem, if a credit score is too low.
A credit score of 500 may prevent lenders from offering a certain amount of money to the borrower. There may be some deficiency in spending that needs to be evaluated.
“We look to see why and what is causing this problem,” Bowman said. “We like to see reasons for everything. A decent score is 650 and up. A great score is in the 700s.”
Annualcreditreport.com is a great tool to monitor one’s credit history. The site monitors all three reporting agencies once a year for free.
“You may not be able to see what your credit score is,” Bowman urged, “but it will give you an idea on your spending habits, and what you need to work on.”
Many local banks in the area have financial specialists to help consumers evaluate their current credit standing.