If you are looking to buy a house or condo any time soon, it is extremely important that your credit score is as high as possible. A lower score can cost you thousands more in higher interest and fees as well as it could possibly reduce your financing options.
So what does influence your score?
Payment History: 35% Impact
Your payment history is your past performance of paying your bills. Obviously, paying your bills in full and on time will have a positive effect on your credit score. Delinquencies within the past twelve months will have more effect on your score than older items.
Outstanding Credit Balances: 30% Impact
Maxing out your credit cards will have a negative impact on your score. This part surprised me. You need to keep your balances below 33% of available credit and ideally below 10% for the best credit score.
Credit History: 15% Impact
If you have a long history of good credit, your score will be higher that someone with a shorter history of good credit, even though everything else is equal. So don't discourage your children from having credit. Just make sure it is handled responsibly.
Type of Credit: 10% Impact
A high concentration of credit cards will have a negative impact on your score. If necessary, move some of the balance to mortgage or installment loans.
Inquires: 10% Impact
We have all heard that too many inquires hurts your score, but believe it or not, each inquiry can cost your from 2 to 50 points! The good news is that the maximum number of inquires that will reduce the score is 10. So make sure that if you are thinking about purchasing a home or condo at the lake, don't go out and look at new cars and let them run your credit report to see if you qualify for that 0% loan. It can cost you thousands on your new home mortgage.
When your credit report is run, it is simply looking at today's snapshot of your credit profile. The score can change dramatically from month to month, depending on your use and activity. Another excellent idea is to get a copy of your credit report and make sure everything is correct. It can actually save you thousands later if you find and correct a problem before the lender gets his hands on your Credit Report.
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