Credit Reports: The “Other” Category
The health of a person’s credit score rests on many factors. While payment history accounts for a great deal of the report, there is one other important area people often neglect. Fully understanding this other category is essential in maintaining good credit and preventing errors/inaccuracies. Let’s take a look at the major factors in play:
About 10% of a person’s credit report reflects the amount of new credit an individual has amassed. This includes accounts recently applied for and activated. For most creditors, the more accounts opened, the greater the risk.
Multiple new credit accounts forecast debt, so when looking to obtain a line of credit or auto loan, a creditor may feel skeptical of your ability to repay all of these balances. New credit becomes a variable, and too many variables hurt your credit score.
While opening new accounts may not always hurt your credit score, doing so in a short timespan will. Inquiries typically remain on a report for up to 24 month — 12 months of this period influence your overall score.
Types of Credit
Believe it or not, the variety of credit on your account also affects your overall score. For example, a mix of credit cards, business accounts, mortgages, and auto loans could impact your score negatively or positively depending on the ratio.
Of all credit types, revolving debt is considered the worst (i.e. credit cards). Always seek installment debt (i.e. auto loan) for the best score in this category. Understand the consequences of retailer programs and consolidation services, as these also play a role in this area of the credit report.
Should you score negatively in either of these two categories, there are ways to improve both simultaneously. Installment debt always affects credit score positively, so for individuals in need of transportation but cannot acquire a car loan, there are still options to consider. At Trillium Auto Group, we can help in both respects. Speak with one of our credit experts today and let us take care of your automotive and financial needs