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Understanding your Credit Score

Posted on in Bankruptcy

There is a lot of talk about how important it is to maintain a good credit profile. If you have poor credit, it can be a challenge to achieve many things that can be made so much easier by maintaining your credit worthiness. However, the problem may be that you do not fully understand what affects your score and how different things can hurt your score. According to Yahoo Finance, it can be simple to understand.

It is common knowledge that paying on time will definitely help you maintain a great credit rating. Your main goal is to keep all of your debts out of collections status. Once the debt has reached collection, paying it off is not going to do a great deal to increase your FICO score. The negative impact will still remain on your report. Your payment history attributes 35% of your credit score.

The amount of debt that you have makes up 30% of your credit score. You do not want to over extend yourself on lines of credit. One thing to remember is that you also do not want to max out your credit. Using up your entire credit line while only making the minimum payment is not only bad for your credit profile but it can also make it take much longer to pay the debt off. This is especially true when it comes to credit card debt.

The age of your credit history attributes to 15% of your credit score. If you are in the process of rebuilding your credit or reestablishing credit after a bankruptcy, opening new lines of credit is not going to instantaneously take you to the high end of the credit spectrum. What is going to help you here is establishing a history of good payment habits.

The type of credit that you have makes up 10% of your credit score. The best scores come from having a variety of credit accounts such as installment loans and revolving accounts.

Your Illinois bankruptcy attorney can assist you with questions regarding your financial health.

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