Your credit score impacts everything from mortgage rates to car insurance premiums. In this episode, Mike and Alex break down the five key factors that determine your credit score and provide actionable steps to improve it, regardless of your starting point.
Key Points Covered:
1. Payment History (35% of your score)
- Why on-time payments are the foundation of good credit
- How late payments impact your score and how long they stay on your report
- Practical tips for never missing a payment deadline
2. Credit Utilization (30% of your score)
- How utilization is calculated and why lower is better
- The ideal utilization ratio for excellent credit
- Strategic ways to lower your utilization without paying off debt
3. Length of Credit History (15% of your score)
- Why closing old accounts can hurt your score
- How to safely maintain older accounts
- Options for those new to credit or with limited history
4. Credit Mix (10% of your score)
- The different types of credit and why diversity matters
- Why you shouldn't take on unnecessary debt just to improve this factor
- How to optimize your credit mix naturally over time
5. New Credit Inquiries (10% of your score)
- How hard inquiries affect your score
- The "rate-shopping" exception for certain loans
- Strategic timing for new credit applications
Actionable Steps for Listeners:
- Set up automatic payments to avoid late payments
- Check your credit reports for errors at AnnualCreditReport.com
- Consider requesting credit limit increases to lower utilization
- Develop a strategic debt payoff plan using either the snowball or avalanche method
- Use free credit monitoring tools to track your progress
Connect With Us:
- Twitter: [@simpledollarpod](https://x.com/simpledollarpod)
- YouTube: [@simpledollarpod](https://www.youtube.com/@simpledollarpod)
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