What Makes Up Your Credit Score

What Makes Up Your Credit Score

As of 2014, the average household income in Gainesville is $58,187.

In 2015, Kelley Blue Book said the average price of a new car is over $33,000.

And today, the median listing price of a home in Gainesville is $219,000.

So how do people buy homes and cars while taking care of their day-to-day living expenses?

Answer: Establishing a relationship based on trust with a financial institution such as a bank or a mortgage lender. Your credit score is how these companies decide how much they can trust you. There are quite a few different factors that go into creating your credit score and it ranges from 850 at its highest and 350 at its lowest. The higher your score, the less your interest rates will be and the more these institutions will be willing to lend or credit you.

But how much does each factor matter when calculating how you score? Let’s break down the percentages:

Payment History

The credit bureaus keep track of this, not because what you buy matters, but it keeps a good track of how well you keep your word. Not making payments on time or making payments in full will be negative marks on your credit score. Being unable to pay any of your bills and filing for bankruptcy can prevent you from establishing a new line of credit or receiving loans for years afterwards. Payment History is 35% of your credit score

How much does each factor matter?

Balance Owed vs Your Credit Limit

This should really go without saying but maxing out your credit, whether it’s just one account or multiple, is not good. It’s okay to have a few different accounts open with available credit but the ideal level to keep your balance at is below 30% of your available credit. So if you have $1000, keep your balance owed below $300. The level of your balance owed is 30% of your credit score.

Types of accounts

How long have you had these accounts?

Lenders and the like also consider how long your accounts have been open for. The longer you have them, the better your score can be. Having these accounts active while keeping their balances low will build a phenomenal credit history. The longer you’ve been in the green the better. Length of time owning the account is 15% of your credit score.

Types of Credit

An auto loan, a mortgage, rental data and the many types of credit cards out there are all types of credit that the credit bureaus consider when calculating your score. The more diversified your credit is, the better your score will look. Diverse types of credit is 10% of your credit score.

How many times has your report been pulled?

How many times your report has been pulled

Checking your credit score many times in a short period can lower your credit score. If too many different mortgage lenders, auto loan lenders, credit card companies or department stores are looking into your score this can have a negative effect for up to a year. Some banks like Wells Fargo allows you to check your own credit score with no penalties but this score is also very specific to the account you’re checking through and may differ from the ones the big three credit bureaus will provide creditors. So if you are just getting ready to settle down and buying a home, you may want to wait a while before also getting your brand new car.

Are you looking to buy a home in the Greater Gainesville-Alachua County Area? Take advantage of the relationship we have with the area’s best mortgage lenders. At Rabell Realty Group, we aspire to be there for you every step of the way, from checking your credit score to signing on the dotted line for your new space. Call us today or stop by our office on the cutest corner in Haile Plantation! We can’t wait to meet you and get started.

5213 SW 91st Terrace, Suite A
Gainesville, FL 32608
(352) 559-8820