What Determines A Credit Score?

credit score   

In order to get the new Ford of your dreams, you'll want to make sure that your credit score is in good order. You may not be sure what determines a credit score, but the breakdown is actually quite simple. These are the five factors that can mean the difference between riding off on the sunset in a dream vehicle or being stuck in your current clunker. 

Payment History (35 Percent)

The single biggest contributing factor to a credit score is your history of paying bills on time. Lenders are only inclined to let you borrow money if they can be sure they'll get it back from you, so those who have not missed or been late on payments tend to be favored higher than those who have. Even if you are late on a payment, it's not the end of the world so long as you make that payment as quickly as possible. 

Amounts Owed (30 Percent)

The key phrase to consider here is credit utilization. It's recommended that you don't use more than 30 percent of your available credit limit at any one time, as borrowing more might suggest a lack of financial responsibility. Keeping your balances as low as possible doesn't just help you here, but it makes it easier to pay those amounts back and lessens the likelihood of paying costly interest.

Credit History (15 Percent)

You might be under the impression that having never had a credit card is good for your record, but that couldn't be further from the case. Lenders like to see borrowers who have responsibly maintained a line of credit for a long time, so it's helpful to open a credit card and leave it open even if you don't intend to use it. If you're young, having new credit is fine so long as you are timely with your payments for as long as it you've had credit.  

New Credit (10 Percent)

Applying for new lines of credit has a negative impact on your credit score, and applying for several new lines of credit in a short span might indicate that you are not in a position to handle something as regular and significant as a monthly car payment. If possible, keep the number of credit inquiries you make in a 12-month span as low as possible.

Credit Types (10 Percent)

There are different kinds of credit to consider, ranging from credit cards and bank loans to student payments and mortgages. If possible, you'll want to show that you are responsible enough to maintain a mix of good credit at once.

If you're not sure that your credit is good enough for a new vehicle purchase, stop by McMullen Ford and speak with our finance experts. We'll work out a plan that works best for you!

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