/biz/ - Business & Finance

>>891163
Now, the credit score has a bit more info. Your credit score is calculated by looking at a few different areas of your borrowing stats. Pic related.

>amounts owed
This is the ratio between your current balances and your total credit limit. The best place to be is 1-10%, ie if you have a $1000 credit limit, keep your balance below $100. Unlike the other metrics, "amounts owed" doesn't have a "history" and can change (and therefore change your score) every month. If you're running a 90% balance one month and pay it all off, your credit score could jump 20 points.

>payment history
Simple. On time payments. Pay everything on time (autopay is your friend) and you're gravy. Note it's the single most important factor. Pay on time. Pay on time. Pay on time.

>new credit
If you have a bunch of new accounts or inquiries (a lender checking your credit score), other creditors may think you're desperate for credit. This makes you look risky.

>length of credit history
Simple. Average amount of time you've had your credit accounts. Keep your oldest credit card(s) open. This is also why I recommend never getting one with an annual fee.

>types of credit
Two parts: what mix of credit do you have (lenders like to see car loans, home loans, etc all being paid on time, in addition to credit cards) and how many lines of credit do you have (more is, paradoxically, better).

So why do I have 6 cards for my credit score? 1) Increased overall credit limit. This lowers the "amounts owed" metric. 2)Types/lines of credit. More is better. 3) Stability in "length of credit history". If you have one card for 10 years then open a new account, your average age of credit drops to 5 years. No bueno. If you have, for example, 6 cards for 10 years and open a new account, your average age of credit drops to 8.5 years. Much less bad.

Note: all the stuff I'm doing is not based on hearsay and retards on the internet. This is just how the scoring works. If anyone can correct me, please do.