If you've ever applied for a loan, than that means someone has checked your credit and likely told you what your credit score was. Your credit score helps determine your creditworthiness and can seem like an ever-changing mystery number.
Your credit score is actually calculated using five distinct factors.
- Payment History - 35%. This is the most significant aspect of your credit. Late payments, especially those more than 30 days late can cause your score to drop significantly.
- Amounts owed - 30%. This percentage consider the total amount you owe on each of your credit accounts.
- Length of credit history - 15%. In general, having a longer credit history is better. However, if you're just starting out, that doesn't mean you will have a poor score.
- New credit - 10%. If you've opened several new accounts recently, this may indicate that you're having a cash-flow problem and could be a greater risk.
- Credit mix - 10%. This look at what kinds of credit accounts you have-mortgage, student loans, credit cards, etc.
Even with this breakdown, certain factors may be more important in one person's credit than another. For example, if you have a short credit history with multiple late payments, that could be a significant issue. But, if you have a strong credit history over 10 years, with late payments long ago, they won't be nearly as big of an issue.
Whatever your credit situation, stop by Tower Ford today and we'll do everything we can to get you approved for the best loan possible.