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"๐™’๐™๐™–๐™ฉ ๐™ž๐™จ ๐™ข๐™ฎ ๐™˜๐™ง๐™š๐™™๐™ž๐™ฉ ๐™จ๐™˜๐™ค๐™ง๐™š ๐™˜๐™ค๐™ข๐™ฅ๐™ค๐™จ๐™š๐™™ ๐™ค๐™›?"


The five components that make up your credit score are:

๐“Ÿ๐“ช๐”‚๐“ถ๐“ฎ๐“ท๐“ฝ ๐“ฑ๐“ฒ๐“ผ๐“ฝ๐“ธ๐“ป๐”‚ (35% ๐“ธ๐“ฏ ๐”‚๐“ธ๐“พ๐“ป ๐“ฌ๐“ป๐“ฎ๐“ญ๐“ฒ๐“ฝ ๐“ผ๐“ฌ๐“ธ๐“ป๐“ฎ) This is the most important part of your credit score. Basically, payment history means what it sounds like: Do you pay the people you owe on time? This applies to school loans, credit cards, etc.

๐“๐“ถ๐“ธ๐“พ๐“ท๐“ฝ๐“ผ ๐“ž๐”€๐“ฎ๐“ญ (30% ๐“ธ๐“ฏ ๐”‚๐“ธ๐“พ๐“ป ๐“ฌ๐“ป๐“ฎ๐“ญ๐“ฒ๐“ฝ ๐“ผ๐“ฌ๐“ธ๐“ป๐“ฎ) Think of this as your spending limit. (This is the credit utilization we talked about above). You never want your credit card balance to be more than 30% of your spending limit. Aliche says credit card companies have this little trigger that says, " 'Danger, danger, danger, she's using too much of her card. She must be in financial trauma and turmoil.' And so that's why they punish you by bringing down your score [if you spend more than 30% of your credit limit]. Because if your score is low, guess what? You can't qualify for more debt. You see, they're literally slowing you down." So 30% is a new 100%.

๐“›๐“ฎ๐“ท๐“ฐ๐“ฝ๐“ฑ ๐“ธ๐“ฏ ๐“’๐“ป๐“ฎ๐“ญ๐“ฒ๐“ฝ ๐“—๐“ฒ๐“ผ๐“ฝ๐“ธ๐“ป๐”‚ (15% ๐“ธ๐“ฏ ๐”‚๐“ธ๐“พ๐“ป ๐“ฌ๐“ป๐“ฎ๐“ญ๐“ฒ๐“ฝ ๐“ผ๐“ฌ๐“ธ๐“ป๐“ฎ) The longer you've had credit, the stronger this part of your credit score will be. Keep your oldest credit card open and pay off a small, recurring bill each month on it and you shouldn't have to worry much about this 15%.

๐“๐“ฎ๐”€ ๐“’๐“ป๐“ฎ๐“ญ๐“ฒ๐“ฝ (10%) Each time you open a new line of credit (think: applying for a loan or new credit card), this 10% of your score is affected. You can lose points just by applying for a new credit card, so make sure you don't apply for new credit unless you really need it. Buying a car or trying to get approved for a rental is probably worth it. But is that fourth credit card worth it? Maybe not.

๐“’๐“ป๐“ฎ๐“ญ๐“ฒ๐“ฝ ๐“œ๐“ฒ๐” (10%) You don't need to do anything for this component. Lenders just like to see that you have a mix of credit such as revolving credit like a credit card, and some installment credit loans, like a mortgage. "They just like to see that you have a mix," Aliche says. "The longer you live, the more of a mix you'll have."

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