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Credit Score AnswersYour credit score is determined and based upon five separate categories. When all five categories are combined, a credit score between 300-850 is calculated, with 850 being the highest credit score available.All of these following categories are taken into consideration before a credit score is assigned. Each category is represented by a percentage of importance, with the higher numbers representing the more important credit scoring factors: Late payments to your creditors and late payments made to collection accounts can lower your credit score. In addition, the presence of any negative public records information (such as non-payment of child support, judgments, liens, bankruptcy, foreclosure, etc.) can also lower your credit score. Total Amount Owed The total amount owed in relation to your credit limits for both installment debt (mortgage, auto loan, etc.) and revolving debt (credit card, charge card, etc.) will also impact your credit score. Ideally, keeping what you owe way below your credit limits can equate to a higher credit score (of course on time payments are a must). In reality this may not always be possible. Just keep in mind that your credit score can be lowered when your balances are close to your credit limits. Credit History Older seasoned accounts (at least 12 months or more) with payments made on time can equate into a higher credit score. New Accounts Too many credit inquiries and too many new accounts opened in a short period of time can lower your credit score. This is often viewed as a need for credit because of the lack of cash to make purchases. It may also be viewed as an 'out of the norm' scenario and a red flag will go up. If your new accounts do not quickly result in high balances, your credit score should begin to rise again. On the other hand, if you obtain three different credit cards in a relatively short period of time and start to accumulate balances on all of them, also in a relatively short period of time, then your credit score might drop further. Type of Credit Account The number of different accounts that you have is important for credit scoring purposes. If you have a few credit cards, a car and a mortgage with on time payments, your score should be relatively good (with all other factors in place). But, if you have fifteen credit cards, a mortgage, a second mortgage and a few car payments, even with on time payments, your credit score can be lower. A higher income might justify all of these credit accounts, but for credit scoring purposes, it poses a possible threat. If something happened in a negative way to impact this persons finances, too many creditors could take a loss. Credit Score Summary Having fewer aged accounts that have on time payments and lower balances (or no balance), in relation to credit limits, will equate into an overall higher credit score. Raise Your Credit Score
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