Blog Post

Credit Scores Explained

Joseph Blossman • Nov 13, 2018
What Is a Credit Score?

Your credit score is essentially a calculated number that banks and lenders use to determine your ability to repay debts. Many factors are taken into consideration when calculating your credit score, and there are three main bureaus (Equifax, TransUnion, and Experian) that track your score. Your credit score can be used by lenders or bankers to determine whether you qualify for any line of credit, interest rates, deposit amounts, length of repayment, and more aspects that determine the overall terms of your line of credit. It is very important to understand the factors that these bureaus look at when configuring your score so that you can start building an impressive credit score.


Typical Score Range:

  • Excellent: 750 and above
  • Good: 700 to 749
  • Fair: 650 to 699
  • Poor: 550 to 649
  • Bad: 550 and below

Credit Score Factors:
 
Payment History
Your payment history makes up about 35% of your credit score. Lenders and bankers use your credit score to determine the amount of risk they will be taking on if they offer you a line of credit. The largest part of that risk is whether or not you can be trusted to pay back your debts in a timely manner. The best way to start building a better credit score is to pay your bills on time.

 
Credit Utilization
Your credit utilization measures how much credit you have used compared to the overall amount of available credit. This ratio makes up about 30% of your credit score. You should aim to keep your credit utilization as low as you can, but not necessarily at 0%. Lenders and bankers want to know if you are responsible and financially stable. Therefore, your credit utilization will show them that you are using your lines of credit wisely. For example, if someone owes $30 on a credit card that has a $300 limit, they appear more responsible than someone who owes $200 on a credit card with a $300 limit.

 
Length of Credit History
This factor only makes up about 10% of your overall credit score, but it can definitely be used to boost your score if you use it to your advantage. Having an open account with a history of timely payments and no derogatory marks will only help you reach that excellent credit score. Again, lenders want to know if you can be trusted, so having an aged account will show them that you are accountable.

 
Credit Mix
The types of credit you take out make up another 10% of your credit score and include things like loans, mortgages, credit cards, and store accounts. The three major bureaus do consider the different lines of credit you have and your overall number of accounts so that lenders can judge whether you can be trusted to use a variety of accounts responsibly. Having a healthy credit mix can definitely help you build a good credit score so long as you are making all of your payments on time.

 
Hard Inquiries
Hard inquiries come from things like credit applications and make up about 10% of your overall credit score. The best way to avoid hurting your credit score in this regard is to avoid applying for any lines of credit you don’t truly need. The effects of a hard inquiry will stay on your credit report for up to two years. Additionally, once you obtain a hard inquiry there is nothing you can do to alleviate its effects.

 
What is not on your credit score:
  • Race
  • Religion
  • Sex
  • Ethnicity
  • Salary
  • Occupation
  • Use of Public Assistance
  • Age
  • Children
  • Any other information that is not found in your credit report
 
You can access your credit report for free on multiple platforms. The federal government allows you to have access to your official credit report from all three major credit bureaus once every 12 months at annualcreditreport.com. You can also use Credit Karma to track monthly updates on your credit score for free. Credit Karma shows you a breakdown of each of the listed factors, ways that you can improve your credit, and will recommended lines of credit for your personal needs. For more information about ways to improve your credit, call us at (901) 375-5513.

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Due to the recent number of confirmed COVID - 19 cases in Shelby County Omni Property Management and Omni Realtors will be making the following changes to protect the health of our tenants, vendors, and staff. Office Hours: Although we will continue to be open, our main office will be closed to the public. You can still reach us at (901) 372-5513 or through your tenant/owner portals online. Showings: Limited to 4 people per showing. Real Estate: If you are working with one of our agents, they will be contacting you to discuss your personalized plans. Rental Payments: Rent can still be dropped off to our office via mail slot and mailed to our office. A confirmation receipt will be emailed to you. For more information about paying rent please click here. Maintenance: Our maintenance office will remain open. To submit a work order, you can use your tenant portal or call our office at (901) 372-5513. Lease Signing : We will sign all Tennessee leases via Skype and E-signatures. One of our agents will be there to review the lease with you and to answer any questions you may have during the signing. Move-In: The keys to the property will be placed in a secured box on the property on the day of your move in. Helpful Links: Tenant Portal Login Owner Portal Login Available Properties Call Us For help signing into your tenant portal call us at (901) 372-5513 or click here.
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