Financial planning and budgeting are a must when it comes to understanding your score and developing a realistic financial budget. Therefore, using credit responsibility can be an asset in the long run. The most popular consumer scoring models are the Vantage and FICO.
General
Of course, using credit card helps avoid fraud by not linking your bank or debit card information to accounts. For this reason, good scores can help in cases of emergencies, obtaining loans and costly purchases. In addition, scores range from 300 to 850.
- Hard Inquiry – Potential lender checking your credit history.
- Soft Inquires – When you check your own report. Also, does not affect your credit scores.
- Credit Age – Don’t close account. Because for average age of credit history, the oldest open accounts give you the longest credit history. When accounts fall off your scores can drop. Use all credit cards from time to time to avoid the possibility of the company closing the account.
- Payment History – Gauge how likely debt is able to be paid on time.
- Derogatory Marks – Collections and Public Records stay on report for 7 to 10 years.
- Debt Collection – Information can be found on the Federal Consumer Financial Protection Bureau Website or by contacting their customer service. Also, after 90 days missed payments can be charged-off and sent to collection agency. So, Payment History includes all possible payments across all reported accounts.
- Consumer Bureaus – Experian, Equifax, Transunion. Consumer Credit Scores measures creditworthiness. Hence your ability to pay back a debt.
- Credit Mix – More than 1 form of credit.
Your Score (FICO)
Credit Mix – Credit Cards, Collections and Loans. For instance
- Payment History – High Impact
- Credit Card Usage – High Impact
- Derogatory Marks – High Impact
- Credit Age – Medium Impact
- Total Accounts – Low Impact
- Hard Inquires – Low Impact
Vantage Score
Also, Community Empower (CE) Score or 1 from any of the 3 major credit agencies. Looks at familiar data as FICO scores.
- Paying on time
- Keep credit card balances low
- Avoiding new credit obligation
- Bank Account
- Other Assets
Since, scores range from 300 to 850. Vantage Models can score consumers who are new to credit as a result, Credit Karma provides Vantage Score 3.0 from Transunion and Equifax. Nav Prime provides Vantage Score 3.0 from Experian and Transunion. Along with Credit Grades from Dun & Bradstreet.
Payment History – High Weight. Can be on report for 7 years. 40% of score
Age and Type of Credit – Extreme Weight. The mix between the length of credit history and your account. 21% of score.
- 30 Year Mortage
- 5 Year Car Loan
- Monthly Credit Card Bills
Credit Utilization – Extreme Weight. Keep under 30%. 20% of score.
Total Balances – Medium Weight. Total debt. Both current and delinquent. 11% of score.
Recent Behavior – Low Weight. Recently opened accounts and number of hard inquires. 5% of score.
Available Credit – Extremely low weight. Amount of credit you have available to use. 3% of score.
Finally, all scoring models try to predict the same thing using the same underlying data. Although credit scores may seem complex, but they don’t have to remain a mystery to you.
