Monday, March 16, 2009

What You Need to Know About Credit Scores Part 4

3. Credit History = 15%

How long have you been credit worthy? If you have a long history of making payments as agreed, it will help your credit score. But this can also hurt older people. By closing old accounts, you are removing all those years of payment history from the credit-scoring model, which is why experts urge you keep accounts you’ve managed efficiently open. FYI: One thing lenders had done in the past with younger borrowers is to have the parents add the child as an “authorized user” on to a credit card account they have had for 20 years. This immediately upped the credit score of the child because he/she had “inherited” a long credit history. However, within the past year, credit bureaus began ignoring any “authorized user” accounts when figuring out a borrower’s credit score.

4. Mix of Accounts = 10%

Ideally, the credit bureaus like to see a mortgage, an auto loan, and three to five credit cards. For a borrower, if you have a Home Equity Line of Credit (HELOC), it will be treated as a revolving account unless it is greater than $40,000. FYI: If it is greater than $40,000, it will be considered a mortgage.



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