Wednesday, September 14, 2016

The Last 3 Factors That Make Up Your FICO Score

The last 3 things that make up your FICO score are how often you apply for, the mix of and the length of time you've had credit.   It is really important to know these things since they make up that last 35% of your FICO score.  Let's start with length of credit history.
How long ago did you start establishing credit?  What is the age of your oldest and your newest credit accounts?  How long since you last used your accounts?  How long since you closed an account?  How long since you last opened an account?  You want to keep your oldest credit lines open even if they don't have balances for as long as you can.  Obviously if your first credit line is a car loan then you can only keep it open for the length of the loan term but if it's a credit card - try to keep it open for as long as possible.  Some credit card companies will shut cards down that aren't in use after a few years but some will leave them open indefinitely.  This will help your FICO score.  Especially if that credit line is and stays in good standing.
Mix of credit sources in use makes up 10% of your FICO score.  How many credit cards do you have in your name?  How many have balances?  How many retail accounts do you have? How many installment loans?  How many mortgages?
People with no credit cards tend to be viewed as a higher risk when it comes to lending than someone who has and manages a credit card responsibly.  Closing an account does not make your credit history go away over night - it can take a number of years (usually 7-10 years).  So these are all things to keep in mind when it comes to your mix of credit and the length of time you've had credit.
Lastly, new credit.  The more accounts you open in a short amount of time, the worse this is for your FICO score.  Most creditors see it as a red flag.  If you are taking on a lot of debt all at once you need to be aware that while your FICO score may not take a hit right away, it will eventually catch up to you.  And if you are applying for a mortgage  you should NEVER apply for additional credit until the process is over.

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