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Understanding Credit Scores

Credit scores are commonly used to determine credit limits and interest rates.

Every month, you receive or lose points based on credit activity.

So, how is a credit score determined?

 
 
 
 

Factors that affect your credit score

35% - Payment History
record of on-time or delinquent payments

30% - Debt Capacity
amount owed relative to limits

15% - Duration
length of payment history

10% - Credit Mix
types of credit (installment can raise your score; revolving can lower it)

10% - Inquiries
new credit and inquiries in the past 12-18 months

Factors that Affect Credit Score Pie Chart
 
 
 
 
 

Actions that can negatively impact
your score


Missing payments

Spending up to credit card limits

shopping excessively for credit

Opening numerous credit accounts in a short timeframe

Having a high portion of revolving vs. installment debts

Closing out credit cards (lowers available capacity)

Borrowing from finance companies

How you can improve
your score


Pay off/pay down credit cards

Avoid closing credit card accounts, as it may
decrease your capacity (exception: if you’ve had
difficulty with credit cards before)

Transition revolving debt into installment debt

Continue making payments on time

Reduce frequency of new account openings

Build a solid credit history with years of experience

Approximate credit weight for each year


40% - Current to 12 months

30% - 13 - 24 months

20% - 25 - 36 months

10% - 37+ months

 
 
 
 

Questions?

Talk to a Wings loan officer or call 1888 692-5626 (LOANS).