Have you ever wondered what impacts your credit score?

If you’re like me, you may have thought that you knew everything you needed to know about your credit. You can go to creditkarka and get your score, you can have credit monitoring and even go to a website to apply for multiple lines. When you get into trouble with your credit, you can go to a credit repair company and get the “Credit You Deserve”.

Here is something that you should know already. YOU ALREADY HAVE THE CREDIT YOU DESERVE.

Why do I need to know this? I want good credit? Just pay my bills and pay on time… I thought that was all there was to it as well. You don’t know what you don’t know. Until I was introduced to this information, I was just as misguided as you are. There is so much more to it than that.

So what does this have to do with a real estate investing website. While you don’t need your own money or good credit to invest in properties, there will be times when you want to use your own credit.

We held an all day training with the CEO of Credit Nerds, Eric Counts. We are very grateful for the time he gave us to share his in depth expertise on the industry.

This article will share a small piece of what was covered. Before we go any further, I should let you in on a little secret. You do not have a credit score. It is more like a grade on a very specific test taken at a specific time. Your “score” doesn’t change or follow you. The content of the report changes and the score is attached to that report which was conducted by a specific bureau. In fact you may have literally 100’s of scores. Is you’re mind blown yet? Now on to what you came here for. For simplicity, we will stick with the term score for knowing there isn’t just one score.

The 5 Factors That Impact Your FICO Credit Score.

 Payment History

The payment history has an importance of 35% and equates to 192 credit score points. For the credit scale of 300 – 850 there are a total of 551 possible points to have for a “perfect score”. Something the Type A’s strive for and have that trophy on the mantle. *Note – Credit is a tool. Not a Trophy. Use it for making money, not buying junk.

For something to show late, it must be 30 calendar days past due. For one occurrence, that will stay on the history for 9 months. If the late payments become a habit, then this becomes progressively worse for you. 60 days late will take 3 years to recover. 90 days late will take 7 years to recover and a charge off will also take 7 years to recover. So make your payments on time, Duh.


This accounts for 30% and 165 points of your score. Here is something that may come as a shock to ya. Debt To Income Ratio has ZERO to do with your credit score. It only affects your approval. This leads to another myth – Credit scores don’t get you approved. They actually get you declined.

You’re overall indebtedness is how much you owe and the balance to limit. A good practice is to manage your levels. The decisions you make here can impact the relationship with the particular bank. Also, there are some decisions you will make to improve your “score” and others to improve the relationship with the bank and yet others that will impact your finances. All of these will need to be weighed during your decision process.

This article is just about the credit score, so I won’t go into it deeply here. One example though is keeping the cards paid off verses keeping a balance, or making multiple payments per month or opening a new line because of a great offer. All of these impact either your finances, the bank relationship or your credit score.

A zero balance is seen as not so good because the bank isn’t being rewarded for extending you credit. 1% – 30% is a good practice to maintain in terms of utilization because it rewards the bank and you are showing that you can manage the credit. 31% – 50%, the banks are going to start getting nervous and come down from their high when you were below 30%. Another key is to stay consistent because they want to see a consistent history that they can count on and predict. Any average utilization over 51% shows poor credit management and a higher risk for late payment or default.

Risk comes down to predictability. If you can predict the future, there is no risk. So just remember that keeping a balance may help your score, but may be bad for your finances.

Age Of Credit File

This accounts for 15% and 82.5 points of your credit score. We can tell ya that the longer an account is open, the better, so Never close a revolving line of credit. When asked if you should open a new line when you already have a few lines… Ask your bank to offer better terms. That could be a lower interest rate or raise the limit.

Mix Of Credit

This accounts for 10% and 55 points of your credit score. You want to eventually have a mix of credit lines. Light on store cards though. Have credit cards, auto loans, a mortgage, etc. and show that you can handle all of them.

Credit Inquiries / New Credit Lines

This also accounts for 10% and 55 points of your credit score. Now I want you to imagine stretching a rubber band. Have you noticed how the farther you stretch it, the more challenging it is AND, the further it snaps back when released? Well credit is the same way. If you have a lower score and have a screw up, it dings you less than if you have a much higher score where the screw up can cost you more. So, remember that the higher the score, the larger the loss when you have a hick up; even a small one.

I hope this helps ya. Let us know in the comments below.

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