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What You Need to Know

Your ability to get future credit is based on your past and current experience.
• Do you pay your bills on time? On time payments represent 35% of your credit score, the largest single factor considered by the credit bureaus. The ability and willingness to pay on time tells any future creditor that you are responsible and serious about your debts.

• Do you carry too much debt? Your debt-to-income represents 30% of your credit score and is an important guage as to your spending habits. Simply put, the credit bureaus will determine what kind of spender they feel that you are based on how much debt you incur as opposed to what you earn. (Example: if your debt is $15,000 and your income is $30,000, your debt-to-income is 50%) What the credit bureau and creditors are looking for is a ratio of between 15 & 25% ideally, although in some cases creditors might allow a higher ratio.

• Do you have different types of credit? This represents 15% of your credit score. Creditors would rather that you have several different types of credit payments, as opposed to, let’s say all credit card debt. Most creditors are aware that credit card debt may fluctuate greatly according to use and can affect your debt-to-income ratio in a short time, while steady installment payments are a good test of your payment reliability over time.

• What is the length of your credit history? Your history is worth 10% of your score. The credit bureau and creditors want to know how long you’ve had credit. If you have no history they cannot judge how you might do in the future, leaving you as a “ghost debtor.” In reality, some creditors would rather see you with a bit of bad credit, rather than no credit history at all. That way, they can tell what you’ve done and if your past mistakes can be corrected.

• Are you applying for too much credit? This is worth 10% of your score. Every time you fill out an application for credit, it is considered an Inquiry and takes between 8-12 points from your credit score. The more inquiries you have the lower your score becomes and the less credit will be extended to you. You need to be cautious about the offers that come in the mail or you see online, as they are usually too good to be true. We advise that you read the fine print of the contract before you sign anything or respond in any way.

• You should do better financially if you have a budget and financial goals. Goals that you set should be attainable, measurable and flexible.

• You have recourse when it comes to situations such as incorrect reporting on your credit report and harassment from creditors

• You are entitled to a free credit report once a year, which you can obtain at: annualcreditreport.com.

While there are sometimes circumstances that can affect your credit, in general good credit can be controlled by you.

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