What is “Savoring” and How Can it Help You Build Wealth?
A credit score is a number that helps lenders, like banks, insurance companies and landlords assess how well you’ve managed your financial obligations. Why is a credit score important? If you’re planning to rent an apartment, get a car loan, or get a mortgage one day, all of these will require a credit score. A higher credit score also allows you to get the best interest rates and even have negotiation power when getting a loan.
Credit scores are calculated based on 5 things and here’s the breakdown:
Payment history relates to how you go about making payments. For example, how often do you miss? How many days past do you pay? This makes up 35% of your credit score.
Amount owed means how much you owe compared to your credit max, making up 30% of your credit score.
Length of credit history means your history of making payments on time, and the longer the history of on time payments, the better. This accounts for 15% of your credit score.
Credit mix represents how many different accounts you have such as home loans or other types of credit cards. This contributes 10%to your credit score.
Lastly, new credit means your recent credit history such as to how many new accounts you’ve opened or credit you’ve applied for. This accounts for 10% of your total credit score.
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It’s important to understand the factors that determine your credit score, so you can have a good idea of how to improve your score. It’s a good idea to check your credit score often. Not only can you identify areas of improvement, but you may also catch any errors made by your creditors and dispute them.