There are a number of factors that go into making up your credit score, which is a part of your overall credit profile. Lenders pull your credit scores from the three credit bureaus, Experian, Equifax, and TransUnion, which calculate your credit score by using a credit scoring model.
One significant part of your credit score is, of course, payment history. How well do you manage the debt that you have now? Are you making your payments on time? Do you have any collection accounts or judgments?
Another key part of your credit score is how much debt you are carrying and, specifically, how much of it you are carrying in relation to what you have available to you.
Do you have a maxed-out credit card? Do you have several of them? The ratio of balance to limit is a factor in your credit scores. A $200 balance on a card with a $1,000 limit looks much better than one with a $950 balance.
Too many installment accounts, such as car loans, or other types of fixed payment loans with high balances tend to drive down credit scores, as it gives the impression that you might be overextended.
The last factor that we’ll look into is the age of your debt. Maintaining a good payment history over a long period of time is a good thing.
The last thing you want is to apply for all kinds of credit cards just before you apply for a mortgage. This may make you look desperate in the eyes of the lenders.
Please let me know if I can answer any questions you have about how all of this works. I’m here to help, and I’m just a call or email away.