Credit Score Utilization Ratio 

It may be useful for you to know just what the credit scoring companies are looking at when the mysteriously produce those credit score numbers. So lets take some of the mystery out of those numbers now.

Your credit score is a mix of 5 main factors, each having a certain effect on your final credit score number. The most looked at variable is your payment history and the least is recent credit inquiries. Lets take a look at the percentages:

Payment History                                     35%
Utilization Ratio                                      30%
Average Length of Credit History        15%
Recent Credit Inquiries                         10%
Mix of Credit                                             10%

Everyone  knows what a payment history is, so be sure to make your payments on time.

Utilization Ratio refers to how much of the alloted credit is used. Say you have a credit card that has a $1,000 limit and you have a $0 to $300 balance on that card, you have used less than 1/3 of the allowed limit. That is great and will keep your credit scores high. However if you have a balance of $900 you have used 90% of the limit and now you cause your scores to go down. Why? The system sees this as over spending and not managing your funds as well as you could.

Length of Credit History is very important too. So keep your oldest credit cards, even if you don't use them.

Inquiries make it look like you are shopping around and may have trouble getting approved for a purchase. Please be careful when you shop around and do not give your social security number to anyone except those you really want to do business with. Many (like a car salesman or banker) will not tell you they are intending to pull your credit report, but they do, so be careful.

Mix of Credit refers to various types of credit you pay on. A good mix would consist of four trade lines such as; a mortgage, an installment loan like a car loan, and two credit cards. This offers the credit reporting system the mix they are looking for.

If you have questions on this subject or previous blog articles contact us, we are happy to assist. marcia@minocquamortgage.com or www.minocquamortgage.com