#1 Are hard & soft inquiries the same?
No, they are not. As an example; a hard inquiry is when you’ve applied for credit with a lender and they review your credit report as part of their decision-making process. This can influence your credit score. A soft inquiry occurs when you check your own credit or, when a company checks your credit when pre-approving you for an offer. These soft inquiries do not appear on your credit report and therefore, do not impact your score.
#2 What is my credit score based on?
Your credit score is based on 5 key factors: Credit Utilization, payment history, account mix, average credit age, & inquiries.
- Payment history alone accounts for 35% of your score. This includes your account payment information, delinquencies, & public records.
- Credit utilization (aka how much you owe on your accounts and the amount of available credit you have) is also heavily weighed as 30% of your score.
- The types of credit you have account for 10% of your score (installment loans, revolving, etc.).
- Length of your credit history accounts for about 15% and is based on how long ago you opened an account and the time since any activity.
- Finally, new credit. Credit inquiries, and number of recently opened accounts fall into this category and account for 10%.
#3 What is considered a “good” score?
It depends as each lender decides how they use these numbers. As a basic guide;
- 760-850: Excellent
- 700-749: Average- Very good
- 650-699: Fair
- 600-649: Poor
- Below 599: Bad
#4 Does it help or hurt your score to be an authorized user on someone’s account?
That depends on a few different factors. If you open a loan or a line of credit with someone, keep in mind that this accounts activity reflects on both of your credit reports. As an authorized user, you may or may not be held liable for defaulted balances. In addition, depending on how much available credit is being utilized, your score may go up or down accordingly.
#5 How would I get credit if no one wants to give it to me?
There are a few different options. You could get a secured card or other credit card that is designed for individuals with no credit or very low credit scores. Another option is to become an authorized user on someone else’s account.
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