What is a Credit Score and How to Increase Yours

TL;DR

Learn about the factors that impact your credit score and how to maintain a good score.

Transcript

what's up guys it's Nick true and today I'm gonna talk to you about what your credit score is and exactly how it's calculated now I have a score of about 760 and my wife has won just over 800 getting a really good credit score starts with understanding how that number is calculated and that's why I'm going to show you the five factors that impact y... Read More

Key Insights

• 💯 There are multiple credit scores used by different lenders, but FICO is the most common one.
• 🎴 Payment history and amounts owed play a significant role in determining credit scores.
• 💳 The length of credit history and credit mix also impact credit scores.
• 💳 Opening new credit accounts frequently can negatively affect credit scores.

Questions & Answers

Q: How are credit scores calculated?

Credit scores are calculated based on factors such as payment history, amounts owed, length of credit history, credit mix, and new credit. These factors play different roles in determining your creditworthiness.

Q: Why is payment history important for credit scores?

Payment history contributes 35% to your credit score. Paying bills on time is crucial, as missed or late payments can significantly impact your credit score and result in higher interest rates and fees.

Q: What is credit utilization ratio?

Credit utilization ratio is the percentage of your available credit that you are using. Keeping your utilization ratio below 10% is ideal for maintaining a good credit score.

Q: How does credit mix affect credit scores?

Credit mix refers to the different types of credit accounts you have, such as credit cards, loans, and mortgages. Having a diverse credit mix can positively impact your credit score as it shows that you can handle various types of credit responsibly.

Summary & Key Takeaways

• There are multiple credit scores used by different lenders, with FICO being the most common one.

• The five factors that affect your credit score are payment history, amounts owed, length of credit history, credit mix, and new credit.

• Maintaining a good credit score requires paying bills on time, keeping credit card utilization low, maintaining a long credit history, having a diverse credit mix, and avoiding frequent new credit applications.