All Credit Score Categories Explained (What Makes Up Your Credit Score?)

Today we're going to be going over all of the different categories that make up your credit score. So we're going to go through each of them individually and we're going to talk about basically the nuts and bolts of each of those categories. How much weight is actually affected on your credit score and we're going to go through all of them so you guys can learn something new about your credit score. Now there's a lot of different ways that your credit score can be broken down but the method that I'm going to be referring to in this video is called the vantage score 3.0. Now this was developed by all three of the major credit bureaus so it is widely used by a lot of different lenders out there. It's not to say that some of them might not use it because they could use other methods but this is the one that I'm going to be talking about the vantage score 3.0. So that being said your credit score actually ranges from 300 at the very bottom and then it can go all the way up to 850 which is the best credit score possible. Now in between all of those numbers you're going to be tiered so obviously the lower range of numbers you're going to be in the poor category and then as you move up in your score you'd move to fair credit, good credit, and then eventually excellent credit which is where you really want to be. Now I'll talk about all of the different categories that make up your credit score because as far as the 850 points is concerned they are broken down into different categories and each of those categories is weighted a lot heavier than others. So we're going to start with the highest tier the highest category which is your payment history and that's worth 40% of your entire credit score so you definitely want to be on top of your payments. Don't make anything late because as far as late fees go they're not supposed to be reported to the bureaus unless they're 30 days past due but personally I would never risk that. I don't want to have a late payment on my history at all because like I said it covers 40% of your entire credit score so you really want to be careful here and not to mention if you are late on a payment your lender they can charge a late fee and that's separate from the credit bureaus so even if it's not being reported you can still pay those late fees which you really don't want to be doing unless you absolutely have to. And then I also want to mention that if you're more than 60 days past due it's even worse for your credit score because there's more penalties involved and also if you do have late payments on your credit report they can actually stay there from 7 all the way to 10 years so definitely avoid late payments at all costs. Now the next category that I want to talk about is called your credit history and this accounts for 21% of your overall score so obviously it is important here that you start to build your credit history while you're young because the longer you have that history established the higher that that tier can be as far as your overall credit score goes. So for instance if you're 18 years old you get a credit card and when you're 28 years old and if you've had that card open for 10 years then that's definitely going to look good on your credit history because you've had it so long. And honestly for a lot of us out there your credit history is just going to happen naturally so for instance when you're younger you might open a credit card eventually you might get a car loan something like that all of those types of things on your credit are going to build that history and a lot of that just comes natural as you age and you progress in life. There's also a lot of credit cards out there that are made for people with a little to no credit history so if you're just starting out and your credit's really low or you don't even have any then there are credit cards out there that can help you with that. Now just keep in mind you want to be responsible with your credit cards and please don't make any late payments because remember that's 40% of your entire credit score. And if you are looking for a starter credit card I will leave an affiliate link down below for creditcards.com so you can check out some of those available credit cards if you have an interest. Now as far as credit history is concerned if you do happen to have a credit card that you don't use very much and you're thinking about canceling it it might be in your best interest just to keep it open and use it once in a while because if you've had that card for a very long time it is helping your credit history. Because I personally I had a credit card open for 12 years and I canceled it just because I wasn't using it very often but honestly that history could have been helping itself even more today because I canceled it about 10 years ago. So that's just something to think about. Now the next category that I want to talk about is called credit usage and this takes up 20% of your overall score. Now basically the way that I can describe this is it's how much you're spending on your credit cards versus how much is available. So the lower amount you spend versus how much you have available is always going to be a good thing and it's going to help out your credit score. So for example if you had two credit cards and each of those had a $5,000 limit then you'd have $10,000 of available credit. Now if you spent $3,000 between the two cards then that would be a 30% spending rate according to how much you have available and 30% is actually right where you want to be. That's right at the line between where it's going to help or hurt you. So if you can keep that below 30% that's going to help your credit and if that's above 30% then it's going to start to hurt your credit score. So just make sure that you pay down your credit card balances every single month because as long as you keep that nice and low that's called your utilization score. As long as it's below 30% then you are good to go and you're helping your credit but if it's above that try to fix it because it is hurting your credit score. Next up is called your total balances and this counts for 11% of your total credit score. Now what this is is it's an accumulation of all of your loans and your credit cards. So we're talking mortgages, auto loans, credit cards, everything like that. They're all going to be lumped up and as you pay them down slowly it's going to slowly also start to help your credit score as well. So this is called your total balances and that's basically what it is. And like I said this does include your credit cards as well so as you pay down those credit card balances it's not only helping this category but it's also helping the other category of the credit usage as well. Now the next category is called credit checks and this one really isn't a big deal because it only counts for five percent of your total score. But just keep in mind that whenever you apply for a new loan you are going to have to have your credit checked and that can negatively affect your score if you have it checked too many times within a two-year period. Because what they say is that you can have up to two that's considered good within a two-year period. Anything after that it can start to affect your score negatively. But just keep in mind it's probably not going to do very much to your score because it's only worth five percent. But let's say that you happen to be shopping for a mortgage and you have your credit pulled five different times through five different lenders because you're just trying to find the best rate. Well that generally should only count as one inquiry because as long as you have those checks within 14 days they say that that should only count as one rather than a whole bunch of them because obviously they know that you're shopping around. Now the last category is called available credit and this one really isn't a big deal because it's only worth three percent of your entire score. But the way that I look at it is it's just how much do you have available in your credit line. So for instance if you have ten thousand dollars worth of credit cards and you're spending nine hundred then you'd have nine thousand one hundred dollars available to you which is a good thing because it's under that 30 percent mark. So obviously this category is also being affected by paying down your credit cards and your loans and things like that. So as long as you're getting all those things under control getting them paid down then you're going to help that category and the other categories as well.