There is a common misconception among credit consumers that if they simply “pay their bills on time,” they will automatically have a high credit/FICO score — this is not the case. Although timely payments are a significant factor in determining an overall credit score, there are other factors that play a roll as well. Undertand various credit score factors is important. These factors include the following:
• Payment History. As discussed above, payment history accounts for 35 percent of an overall credit score, so be sure to pay bills on time if you are looking to increase your credit score.
• Outstanding Balances. How much debt you have accounts for 30 percent of your overall score, making this the 2nd highest factor in the credit scoring process.
• Mix of Credit. The TYPE of credit you have also has an effect, which accounts for 10 percent of your score. A healthy mix of installment debt and credit card/revolving debt will help increase someone’s overall score.
• Credit Inquiries. A “hard” inquiry will remain on a credit file for 2 years, but will only negatively affect a score for up to 1 year, accounting for 10% of an overall score.
For a more detailed explanation on the above credit score factors, visit the source article here.
Lorraine Greenberg & Associates
Chicago Bankruptcy Attorneys
