Many of us apply for credit at different places. But for some reason they all have different scores. Every company that pulls your score has their own algorithm based off your credit report. Other companies simply use old recycled credit reports which may not be the most up to date. So yes every time you pull your credit from a different company you may have a different score. Rule of thumb, give or take about 20 points. But don’t be discouraged there are ways to manipulate these scores to your advantage. The credit system is not perfect but you must know what you’re doing. So, lets break down what makes up a credit score.
Payment history this makes up 35% of your credit score and probably the most important. A late payment can destroy your score in the blink of an eye. You never really want to be late these are probably the hardest things to get removed from your credit report. Some things that have personally seen drop a score overnight are being late on a mortgage or car payment. If that happens you can expect to lose 30 plus points. Also, if you have 2 or more late payments on a mortgage they will deny you automatically for a new home.
Credit Usage makes up 30% of credit score. You want to keep your credit cards under 35% and I would say 30% just to be on the safe side. Once you start going over that your score starts to decrease. God forbid you max out a credit card. Your score will drop 30 plus points. Monitor these things and be disciplined. The good news here is once you pay it back down your points will come back pretty quick.
Length of Credit History makes up 15% of your score. When it comes to this you want to keep your oldest positive account open. Some people make the mistake of paying things off and then closing the account. But as soon as you do that you lose your credit history. Even if it was positive.
Inquires make up 10% of your credit score. You acquire these every time you apply for credit cards, apartments, cars, homes, etc. They stay on your credit report for up to 2 years. Now some companies will say that if you applied for something all in a short amount of time that counts as one and won’t hurt your score that much. That is not true. Every time you apply your score drops. It happened to me. They ran my credit 11 times when I was trying to buy my first house at 21 and before I even had established my credit it dropped almost 100 points. The good thing here is they can be removed.
Types of Credit makes up 10% of your score. This is your mix of credit. So when you have things like a home loan and car loan it looks good on your credit. When you have a mix of credit cards that are on time it looks good on your credit. When you first apply for these loans and get approved initially you will take a loss of points. But they will come back plus some especially if you are paying them on time.
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