Length of Time You've Had Credit

The longer you've been a consumer with credit accounts, the higher your score will be. Points are awarded a credit score for extended credit histories, as long as the credit history is good. Extended patterns of bad credit behavior, regardless of how long the accounts have been opened, won't help a score. But long histories of timely payment will elevate a credit score.

Fifteen percent of a credit score, or a possible 127 points, can be awarded for length of credit histories.

Credit Inquiries

How often you apply for credit accounts for 10 percent of your total score. The more times you apply for credit, the more it hurts your score.

When someone is applying for numerous credit accounts, it can be a signal that the consumer is in over her head. She might be applying for credit to pay bills. Or perhaps she bought an automobile that squeezed her budget each month until she began paying everyday bills with credit cards.

Remember, companies can look at your credit without your knowing about it to see if they want to issue you a credit card. These are called “soft” inquiries and do not count in the creditscoring model.

Nor do consumer inquiries where consumers check their own credit for errors by logging on to annualcredit report.com, for instance.

A “hard” inquiry is when the consumer makes a direct request for credit. What happens when someone applies for a mortgage with two or three different companies at the same time? Applying for credit for the same purchase at the same time would be considered a single inquiry. Applying for credit over an extended period, say 60 or 90 days, would be viewed as multiple inquiries and can hurt a score.

When you apply for employment somewhere, the employer may run a credit report on you. This, too, would be considered a soft inquiry. Same with other organizations such as insurance companies that run credit reports for purposes other than issuing credit

Types of Credit

This final category, which makes up the final 10 percent of the score, reviews the various credit accounts as to the type of credit issued and who issued it. A class of credit companies known as “Finance Agencies” offers credit to those with subpar credit histories or for those who have a hard time obtaining credit. Having a credit account from a finance agency won't necessarily damage a score, but the payment histories on them won't help a credit score as much as a traditional credit account.

The best credit account to have? A mortgage. Timely payments on a mortgage is the single best account to have on a credit report.

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