You may not be ready to start the new year hearing about credit scores; but if you want to stay ahead financially you need to start the new year off with a fresh understanding of credit scores.

Your credit score is so important to your finances because it is used by insurance companies, loan companies and utility companies to evaluate you as a customer.    If you make the effort to improve credit score above 750, financial institutions will charge you less for goods and services.  A credit score above 750 shows financial institutions that you are financially responsible.

To help improve your credit score, you should first understand how credit scores are calculated by the 3 national credit reporting agencies.  Your credit score is based on a number of different factors.   You can control most of those factors, if you understand and are aware of them.

Credit Score Improvement

Your Payment History:

35% of your credit score is determined by your payment history.   That’s almost one-third of your score.   So you control almost one-third of your credit score.

The best way to improve your credit score is to make all of your payment on time.   This means to pay your auto, home, boat and life insurance payments on time.   Make your loan payments, auto loans and mortgage loans, on time.   And pay your credit cards on time.

Your Outstanding Credit:

30% of your credit score is determined by the amount of money you owe each creditor.

Keep your outstanding credit to a minimum.

Your Credit Mix:

10% of your credit score is determined by your credit mix.

One way to improve your credit is to have a “mix” of different credit.   Making payments on a few different types of credit looks better to the credit reporting agencies.

Different credit can make up your credit mix can include a mortgage, an auto or student loan and a credit card.

Your Credit Limit:

Always spend below your credit limit.   If you spend up to your credit card limits, creditors view that as a sign that your spending may be getting close to being out of control.

If you spend up to your credit limit, your credit score will go down.

Your Credit History:

The length of your credit history is another factor that determines your credit score.

If you want to pay less for the things that you buy, get to know your credit score and learn how to improve your credit score.