Did you know that a low credit score can affect your employment opportunities?  More and more employers are looking at your credit.  Getting hired, promoted, or receiving a company credit card can depend on your credit due to company policies and procedures that mandate a strong credit report and score, regardless of how much they like you.  Also, there is almost no way for a person to be hired by the government, banks, lending companies, insurance companies, advising firms, or accounting firms if they have a bad credit score or report.

The five factors that comprise your credit score are:

35% – Payment History

  • A recent 30-day late will cost you 100 points immediately.
  • Being past due just 1-day on an account can cost 50+ points. 

30% – Amounts owed (25% revolving and 5% installment debt)

  • Keep revolving debt balances under 30% of the limit to improve your credit score (at least 3 months prior to applying for credit).
  • Keep revolving debt balances under 50% to maintain a lower credit score.
  • A maxed out credit card can cost 50+ points; Over the credit limit can cost 75+ points.
  • Pay down each credit card evenly by its ratio to your total credit card debt. 

15% – Length of credit history

  • Keep old accounts active.
  • Don’t close credit card accounts unless you’re a victim of identity theft, you’re getting divorced, or an authorized user on your account has a high balance or negative history.

10% – Mix of credit

  • It’s good to have a mixture of both revolving and installment accounts.
  • 2-3 revolving credit cards are optimal with an established credit history.  Don’t use 3rd party cards (i.e., department store, gas cards, etc.).

10% – New credit inquiries

  • Soft inquiries don’t impact your credit score.
  • Hard inquires (i.e., when you apply for credit) do.  A hard inquiry can cost between one and 15+ points, depending on your current score, and can remain on your report for 2 years.
  • Multiple mortgage or auto inquiries will only be counted as one within a 30-day period.

John P. Chladek, MBA, CFP® is the President of Chladek Wealth Management, LLC, a fee-only financial planning and investment management firm specializing in helping families and couples who are not yet retired realize their financial goals.  For more information, visit http://www.chladekwealth.com.

All written content on this site is for information purposes only.  Opinions expressed herein are solely those of John P. Chladek, MBA, CFP®, President, Chladek Wealth Management, LLC.  Material presented is believed to be from reliable sources and we make no representations as to its accuracy or completeness.  All information and ideas should be discussed in detail with your individual advisor prior to implementation.  Investment Advisory services are offered by Chladek Wealth Management, LLC, a registered investment advisory firm in the State of Kansas.  The presence of this web site on the Internet shall in no direct or indirect way be construed or interpreted as a solicitation to sell or offer to sell investment advisory services to any residents of any state other than the State of Kansas or where otherwise legally permitted.