Compass SF

Demystify Your Credit Score Calculation

by Haruko Hata DRE #01824502 10/27/2019

Understanding how your credit score goes together and how to improve it is a bit of a murky subject. The advice out there is not always consistent and depends on the financial viewpoint of the source. However, there are concrete factors that do go into the calculation of a credit score and when you understand what ingredients go into the mix, you can cook up a sweet situation for yourself. To begin, you will need to understand the many financial terms that you will encounter.

Learning the lingo 

A credit utilization, or utilization ratio, is how much of your total available credit is open for use. Most of the advice you find states that a ratio under 30% is good, but a better number is under 15%. Revolving credit cards are those accounts that you can leave a balance on and roll it over month-to-month, paying over time. Examples of these would be your major name cards, some gas cards, and department store cards. Installment plans are your auto, home loans, and student loans. Charge card credit accounts are those that you pay in full each month. An example is American Express Charge Card versus American Express Credit Card. Service credit accounts are those you have an agreement with, like your utilities or cell phone service provider. In the end, having a mix of credit types helps to raise your credit score. 

Helpful hints for credit scores

Another thing that helps your score is the age or history, of your credit accounts. Age counts for a percentage of your creditworthiness. The older your accounts are, the better, proof that time is on your side. Closing accounts can raise your ratio, so be careful about what you decide to do with paid-off credit cards or lines of credit. Even though you are not going to use that account, you may want to leave it open at a zero balance to help keep your ratio low. Apply for new credit only when you need to. For example, when buying a vehicle or a home, having too many inquiries for new credit in a small period can lower your score. Paying on time is a tremendous way to keep your score in a desirable range. Pay on or before the due date, every month. Keeping an eye on your utilization ratio so you can be sure to keep your score where you want.

Take the time this month to calculate your credit utilization ratio.

About the Author
Author

Haruko Hata DRE #01824502

It’s not just about a house…it’s more about your life and dream….

My passion is to help my clients make their dreams come true and to make them happy. I love to see smiles on their faces, which makes me happy, too. That’s why I always strive to look at the positive potential of my clients’ dreams.

As a Buyer’s Agent: I make every effort to truly understand all of your needs and wants to purchase the right property at the right price for you. I provide you as much data & information as I can gather and honest advice & insight based on my experience, so you can best decide upon the path that will be most beneficial to you.

As a Seller’s Agent: I treat each listing as my own and use all of my resources to ensure that your home gets the price it deserves and that the sale is handled efficiently and expeditiously for you. My commitment is to eliminate your stress in the process of selling your property and to make your transition smooth and delightful.

With my personality, creativity, and professional knowledge, I’m readily available to help you and to answer all your questions. Call me today and let’s start working on your dream together!