Welcome back! If you’re just joining us, you might want to skip back to here and get your credit score. ;o)
So now that you have your number (or at least know how/where to get), it’s time to examine how a credit score gets built – and it’s super interesting! Okay, maybe not super interesting, but definitely something you need to know about. :o)
What makes up your credit score?
The Iowa Credit Union League provided an excellent pie chart (mmm… pie!) that helps explain the stuff that gives us that three digit number:
10% New Credit: Limit your credit cards and store cards to just what you’ll ACTUALLY use. (Make sure to ask yourself if saving that extra 10% of your purchase is worth it!) Opening new lines of credit frequently can hurt your overall score.
15% Length of Credit History: The longer you’ve successfully handled credit, the better your score (potentially) will be.
30% Amounts Owed: This is a measure of your “credit utilization” or balance to credit limit ratio. The lower you’re using overall, the better your score. Try to keep your credit card balance under 30% of the available credit limit.
35% Payment History: Put simply, if you’re late on payments, you score WILL suffer. Make sure all payments are being made on time or within the grace period.
Good job making it through all of that! I think you’ve earned a slice of PIE!!! Baw ha ha. In the spirit of pie and pie charts, I have made my own pie chart…
Tell us in the comments below, did any pieces of this credit pie surprise you? Or tell us what your favorite kind of pie is!