![]() ![]() The final credit scoring category deals with the types of accounts that appear on your credit report. This unofficial rule stops you from opening a new Chase credit card if you’ve opened five or more credit cards with any card issuer in the past 24 months. It is also important to be aware of rules like Chase’s 5/24. If you don’t go overboard with too many credit applications in a 12-month span, you should be fine. Yet new accounts are a minor factor in your credit score, worth just 10% of your FICO Score. Lenders may see multiple account openings in a short period of time as a warning that you’re desperate to open credit. Hard inquiries stay on your report for up to two years but they only influence your FICO Score for 12 months (if they have any impact at all). This hard inquiry will factor into your credit score whether you’re approved or not. ![]() When you apply for new credit, a “ hard inquiry” from the credit card company will appear on your credit report. ![]() Once the account falls off your report, it will no longer count in your average age of credit. A closed credit card will fall off your credit report after 7-10 years (depending on whether it’s negative or positive). Doing so may help you avoid the risk of having your account closed due to inactivity. If you have a loved one willing to add you as an authorized user to an older credit card account, this might help you in the length of credit history category too.įinally, it’s wise to maintain some activity on all of your credit cards. Your length of credit history should naturally increase over time. You may need a year or more of credit history to be considered for some premium rewards cards. As the age of your oldest account and your average age of accounts grows older, your scores may improve. While length of credit history is a less significant credit scoring factor, it’s still quite important. Following this advice will save you money and protect your credit score at the same time. It’s in your best interest to avoid carrying a balance by paying your full credit card balance each month. That is, you’re utilizing half of your credit limit.Ĭredit scoring models reward users who discipline themselves and maintain low credit card utilization rates. If you owe $2,500 on a card with a $5,000 limit, your utilization ratio is 50%. Credit utilization describes your credit card limits and balances, and how these figures relate to each other.Īlthough the term utilization may be unfamiliar to you, the concept is simple enough to grasp. Your credit card utilization rate in particular influences 30% of your FICO Score. Amounts owed: 30%Īfter payment history, FICO places a big emphasis on the debts you owe. If you’re worried about forgetting to make a payment, consider setting up automatic drafts as a backup measure. Paying your bill on time is also an important part of our 10 credit card commandments. Other negative information like collection accounts and charge-offs can cause you problems in this category as well. This data impacts 35% of your FICO Score.Īny missed payments can potentially damage your score, and even the occasional late payment can be a serious red flag. The most important information on your credit report has to do with your payment history. Credit score factors Payment history: 35% The Points Guy will not share or sell your email. I would like to subscribe to The Points Guy newsletters and special email promotions. Related reading: 5 lesser-known things that affect your credit score With FICO scores in particular, your credit score is influenced by five categories of information - all of which can be found in your credit report. Still, it’s good to know how your credit score is calculated and how you can improve it. It’s like how SPF 100 sunscreen doesn’t work significantly better than SPF 50. Once you earn a very good credit score, you won’t gain much from having an 850 FICO score instead of a 760. However, you don't need to hold your breath to be close to 850 in order to have a good credit score. The highest score is 850 for most credit score ranges. In the credit card world, a 740 score may grant you access to almost any credit card on the market. A FICO score of at least 760 should get you the best treatment available from lenders (including mortgages and auto loans). Ideally, you should aim for a credit score of 760 or higher. One card issuer might offer you its best rate and terms at around the 720 score mark, while the next might want you to have a 740 score to get that same type of treatment. However, it’s really up to each lender to set its own criteria when it comes to credit scores. These are the five general credit score classifications. ![]()
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