Organizing/Budgeting Your Credit and How Credit is Scored

I have had a nice response from people interested in becoming credit-organized.  Because having good credit scores and good credit-budgeting skills go hand in hand, below is information regarding how credit is scored.  The information was retrieved from the FICO website, should you wish to investigate more. 

In all aspects of life, we must accept responsibility for our actions.  A lack of action is an action.  Therefore, if you do not research and/or disregard what is on your credit report - you are still responsible. I recommend you take action and take responsibility!

There are five types of information used to calculate a FICO score at any given point in time. Each type of information counts as a percentage of a total FICO score:

These percentages are based on the importance of the five categories for the general population. 

Inquiries are a subset of the "new credit" category shown, which accounts for 10% of the total FICO score. Their importance depends on the overall information in the credit report.

Inquiries may or may not affect the FICO score.

A FICO score takes into account only voluntary inquiries that result from an application for credit. The information about inquiries that can be factored into the FICO score includes:

1.     Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account.

2.     Number of recent credit inquiries.

3.     Time since recent account opening(s), by type of account.

4.     Time since credit inquiry(ies).

Statistically speaking, a large numbers of inquiries also mean greater risk: People with six inquiries or more on their credit reports are eight times more likely to declare bankruptcy than people with no inquiries on their reports.

ADVICE and a Rule of Thumb:

Adding up the numbers, 65% of your credit score is based on how much you owe and your payment history - that alone should explain how to pay credit card bills ~ IF you can.  This is real life, and sometimes we can't do that.  However, you now have a goal that you can back  by using statistics and information.

You know this already - but make your payments on time.  Further, a person who's amount owed on one account is less than 51% of credit allowed will have a higher FICO score.  With that said, if you owe more than 51% of your credit limit, inquiring and/or receiving new lines of credit could drastically affect your credit scores. 

Next part:  Different kinds of credit, i.e., revolving - installment - contractual.