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Credit Where Credit’s Due

  

  

  

  

  

  

  

  

  

You’ve no doubt heard or seen advertisements from various financial services that all claim to be the quickest and easiest way to obtain a credit report, all centered around one simple word…FREE!!!!

What these ads often fail to do is educate consumers as to how their scores are affected - positively and negatively - by their everyday actions. At Midwest Lending, we look to educate our consumers while guiding them with our financial expertise.

Take a look below at HOW your credit score is made up – you just may save yourself a lot of time and trouble.

  • Payment History (35%)

A simple concept - pay your bills on time. Credit cards, car loans, medical bills - a 30 day or later payment on any of them can have a serious effect on your overall score.

  • Amounts Owed (30%)

You may have heard the term ‘credit utilization ratio’. This is a fancy way of saying, “Don’t use all of the credit available to you." Rather than maxing out your credit cards, focus on spending somewhere around 30% of your limit. For example, if you have a $2,000 credit limit on your Visa card, maintaining a balance of over $600 could hurt your credit rating.

  • Length of Credit History (15%)

Generally, the longer you’ve been using the various forms of credit, the better. Having NO credit history can make it just as difficult to get a mortgage as having BAD credit history.

  • Credit Mix (10%)

It’s best to mix up the types of open accounts that you have. A nice mixture of revolving debt (for example, credit cards) vs. installment loans (mortgages, student loan payments) will do the trick.

  • New Credit (10%)

Applying for several new credit cards and/or new loans in a short period of time makes you look desperate for credit. Find a natural balance, as credit bureaus take into account your overall financial behavior. Keep in mind however, that multiple inquiries to the same service (i.e. a mortgage) is understood, as a responsible borrower is expected to shop.