What Determines Your Credit Score

 

What You Need to Know About Your Credit Score

 

If you're in the process of buying a new vehicle, you're probably hearing the term "credit score" a lot. However, if this is your first time financing a ride, you might not know what a credit score is or what it means. You're not alone. Browse this concise credit score guide to gain a better understanding of this essential information

 

How to Determine Your Credit Score

 

Your credit score is a number that's used by financial institutions to determine how likely you are to pay off a loan. It is created by calculating several factors, all varying in the weight of their influence. The biggest factor of your credit score is payment history, which makes up 35% of the score. This looks at things like whether you've made payments on time or had any instances of bankruptcy. Payments that you currently owe comprise 30% of your credit score. The length of your credit history is less important, making up 15% of the score. New credit and types of credit compose 10% of the credit score.

 

How to Improve Your Credit Score

 

By knowing what makes up your credit score, you have the power to improve your score by taking simple, intentional steps. Start by addressing the most influential factors, like the current balances. Always make your payments on time, even if you can pay only the minimum. Focus first on paying down the largest balances. The ideal ratio is to owe 30% of your current credit. Once you have paid off your balances so that each one hovers near or below this ration, you can start paying off the remaining amounts on those balances.

 

Also, avoid the temptation to have old debt removed from your credit history. Since credit history is 15% of your credit score, old debt can actually be a positive thing for your credit score, and shows that a person can handle making payments.

 

Still have questions about what your credit score means for you? Don't hesitate to call the team at Blue Springs Ford; we'll be happy to answer any of your financing questions.

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