At some point, a responsible consumer may find themselves managing multiple lines of credit. These can range from utilities to credit cards and from school loans to home mortgages. Many consumers, however, do not understand the roles that their lines of credit play in influencing their credit scores. Below is a list of facts that consumers should keep in mind when considering how to handle their lines of credit.
- Utilities are as important as credit cards. Bills of any kind, even utilities bills, are as important to a consumer’s credit score as any other line of credit. Many consumers make the mistake of thinking that certain lines of credit, such as credit cards and home loans, are the only things that can affect their credit score. The truth is, however, that utilities are, in fact, a form of credit themselves, with the utility companies “lending” the service to the consumer in lieu of a monthly payment. Of co
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Credit scores are used in nearly every industry to determine the financial stability of a person or business. There are two main types of credit scores – PLUS and FICO – with the latter being the most commonly used. Credit reports are issued once every three months by the three major credit reporting agencies, although the credit score itself is updated on a monthly basis. Maintaining a good credit score is the key to gaining approval for credit cards, mortgages, vehicle loans, and any other form of financial assistance.
How is the FICO Credit Score Calculated?
The FICO credit score is calculated based on five main factors – payment history (affects 35% of the credit score), amount owed (affects 30%), credit history length (affects 15%), new credit (affects 10%), and types of credit used (affects 10%). Each of these factors is split into a plethora of subsections that contribute to the overall score. A maj
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Dear Creditnet: I’m currently in the market for a new TV and Best Buy is offering 0% financing for three years.
My question is when you open an account like this, how big of a hit does your FICO score usually take and how long will it take to rebound?
I could easily pay cash for the TV up front, but the “finance” person in me says it’s free money—why not take the terms?
Answer: Hard inquiries for a new credit card will generally drop your FICO score about five points, but it should bounce back within a few months. In some cases, a hard inquiry may not even affect your FICO score at all, so I wouldn’t worry too much about having an extra inquiry on your credit reports.
However, what you should worry about is how retail credit card deals (what Best Buy is actually offering you) can often wreak havoc on your credit utilization ratio, which accounts for about 30% of your FICO score. Here’s how
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