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HomeBlog Blog“I’m Confused About My Credit Score”
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“I’m Confused About My Credit Score”

January 22, 2013 by National Debt Relief

Woman holding glasses and reviewing credit card statementI saw a question last week from a woman who had a credit card with a $1,000 limit. She checked her credit report and found that her “high balance” was listed as $300. She had heard that if your balance is 30% or less of your credit limit, that would not be seen as a high balance. She was confused because $300 is clearly 30% of her credit limit and was wondering why it would be considered a high balance.

It doesn’t work that way

Credit scores can be both tricky and confusing. But in this woman’s case, the answer is simple. Her high balance is whatever her highest balance was or in this case the $300.

The five components of your credit score

It’s practically impossible to say exactly how the three credit reporting bureaus calculate your credit scores because each has its own proprietary formula. However, it is safe to say that there are five components in your FICO credit score and they are.

Payment history – 35%

The largest and the most important component in your credit record is your payment history. Have you been late in paying a utility bill, a credit card or an auto loan payment? If so, this would cause your credit score to drop. On the other hand, if you pay all your bills on time, your FICO score should be good.

Credit utilization – 30%

Your credit utilization is the ratio between the amount of credit you have available and the amount of credit you’ve used. If you had $20,000 in credit available but used only $5,000 of it, you would have a good credit utilization ratio. In comparison, if you had used $18,000 of that $20,000, you would have a bad credit utilization ratio, which would negatively affect your FICO score.

Length of credit history – 15%

This one is pretty simple. If you’ve had a long credit history you’ll have a better FICO score – assuming you have handled your credit responsibly.

Types of credit – 10%

Your FICO score will also be impacted by the types of credit you’ve used such as consumer finance, installment loans, revolving credit (think credit cards) and a mortgage. Your credit score will be helped if you’ve successfully managed multiple types of credit.

Recent searches for credit – 10%

What this means is how many times there have been inquiries made about your credit. The “hard inquiries” are those that you initiated by asking for a loan, credit card or whatever. There are also “soft inquiries”, which are those made by companies that are looking to loan you money such as pre-approved credit card offers. As a general rule, every time you apply for credit, you’ll lose 3 to 5 points off your credit score. However, the “soft inquiries” will not effect it.

The net/net

The net/net of this is that if you want a good credit score, make sure you always make all your payments on time. When you do get a credit card, try for one that has a high limit and don’t charge very much on it so you will have a good credit utilization ratio. If possible, use multiple types of credit but again make sure you make all your payments on time. And, finally, don’t continually apply for some type of credit.

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National Debt Relief is one of the largest and best-rated debt settlement companies in the country. In addition to providing excellent, 5-star services to our clients, we also focus on educating consumers across America on how to best manage their money. Our posts cover topics around personal finance, saving tips, and much more. We’ve served thousands of clients, settled over $1 billion in consumer debt, and our services have been featured on sites like NerdWallet, Mashable, HuffPost, and Glamour.

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Easy National Debt Relief Caller: Austin Transcribed WE 1/17/2021 Austin: Reminder, our call may be recorded. What led you to National Debt Relief and why did you go with National Debt Relief over another company? DEBORAH: To be honest with you, just saw the commercial on TV. Austin: Could you maybe walk me through any ways that National Debt Relief, the services they've helped you with and maybe your thoughts on the enrollment process, the ease or difficulty of that process? DEBORAH: No, it wasn't difficult. It was good. I mean, it was smooth. Everything's went well, so far. Austin: And are there any ways that the program has worked for you? DEBORAH: I have a little more extra money. Austin: And do you remember the name of-- I know you probably worked with multiple people, but do you remember the name of any of the negotiators you've worked with? DEBORAH: No, I sure don’t. Austin: But is there anything about them that has impressed you or anything your negotiators could have improved? DEBORAH: No. I mean honestly, they've all been great. With any issues I've had, they've taken care of it. It's smooth sailing so far. Austin: How would you rate your experience with National Debt Relief on a scale of one to five, where five means you would recommend and one means very dissatisfied? DEBORAH: 5. Austin: What would you tell others or friends if they were to ask about National Debt Relief? DEBORAH: I would tell them the same thing that I've been telling you. Austin: Is there anything else you wanted to share on the experience or any other highlights you'd like to mention? DEBORAH: No, I appreciate it. Austin: And would it be okay if we shared your comments, with the first name and city only, as a review on our public site for National Debt Relief? DEBORAH: Yeah, I'd rather you didn't, if you don't mind. Austin: Oh, well I can definitely respect that. And I'll tell you, if it's like a privacy thing, we can remove the name and or the city, whatever you'd prefer. It’s mainly just the comments around if National Debt Relief has worked, and the customer service, ease of the process. We could do like a Deborah from USA, if you’d prefer that or even remove the name, like a D from the USA. Whatever you feel comfortable with, that would be okay. DEBORAH: So long as there's no name and face attached, I'm fine. Austin: Of course. Okay. So like a D from the USA? DEBORAH: That works. Austin: All right. We’ll do that, Deborah. Would you like us to email you a link to that review when it's published so you could see it? DEBORAH: Yes. Austin: Reminder, our call may have been recorded.

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