- Payment History: 35%
- Credit Utilization: 30%
- Length of Credit History: 15%
- New Credit: 10%
- Credit Mix 10%
Now that we have reviewed the categories that make up your credit score and their weightings, let’s look at the 4 ways that you are hurting your credit score.
High Credit Utilization
Let’s look at an example to help you calculate your credit utilization.
- Visa Card #1: $1500 of credit used, $3000 total available credit
- Discover Card #2: $200 of credit used, $1000 total available credit
- Citi Card #3: $0 of credit used, $500 total available credit
In that example, there is a total amount of available credit among the 3 credit cards of $4500 and $1700 of that credit is being used. Therefore, your credit utilization would be 37%.
The best way to tackle high credit utilization is to pay down debt! If you are looking for additional income to speed up paying off your debt, you could start a blog or try one of these 10 unique ways to make an extra $250 this month.
Too Many Inquires
The third way that you are hurting your credit score is by having too many credit inquiries. Credit inquiries are requests by businesses to check your credit. Credit inquiries can come from a variety of places. For example, when you apply for any type of credit (credit card, personal loan, home loan, etc…), there is typically a credit inquiry. Credit inquiries can also come from employer background checks as well as pre-screened credit offers.
There are two types of credit inquiries (also know as credit pulls): soft or hard. Typically only hard credit inquiries affect your credit score. In addition, companies that are doing a hard credit pull must have your permission. Too many hard pulls, especially within a short amount of time, can negatively affect your credit score.
Not Checking Your Credit Regularly
The last way that you are hurting your credit score is by not checking your credit regularly. I know you are thinking you don’t need to check your credit until you are in the market for a home or car. I am here to tell you that you need to check your credit regularly (at least once per year) for 2 main reasons.
- First of all, if you wait to check your credit report until you actually need to get a new line of credit it may be too late. For example, say your car breaks down tomorrow and you need to finance a vehicle. If you haven’t been checking your credit regularly, you could be surprised by inaccurate information on your credit report or things you didn’t know about. That information would relate to a higher interest rate than you were expecting or even worst, being denied for new credit.
- Secondly, if there is inaccurate infirmation on your credit report you can dispute it with the credit bureaus. This does take time but you can catch the issue right away. Personally, I was a victim of identity theft in the past so I have experienced the frustration and time related to correcting my credit report.
There are a variety of free credit monitoring solutions available which allow you to check everything previously discussed and your actual credit score. I would suggest that you start with pulling a free copy of your credit report through Annual Credit Report. Annual Credit Report is a website collaborative between the 3 major credit bureaus: Experian, Equifax, and Transunion. Through federal law, you are allowed one copy of your credit report from each bureau every twelve months.