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“Struggle is a never-ending process. Freedom is never really won. You earn it and win it in every generation.” – Coretta Scott King

August 4, 2022

Understanding Your Credit Score – Credit Variety, Employment History and Patience

This is our third and final blog post in a series about understanding credit. It’s such an important topic that we wanted to give you as much information as possible to help you build, improve or maintain your credit score and credit history.

 

Our first blog post in this series provided an explanation of why credit matters and the component that make up your credit score.

 

Our second blog post covered late payments and credit cards.

 

Today, we conclude with credit variety, employment history and time.

 

 Strong credit requires strong juggling skills.

 

Your credit portfolio looks nice and shiny when you have a variety of different types of loans, and when all those loans are paid on time.

 

Ideally, you want a good loan mix. Paying a mortgage loan, an auto loan, a few credit cards and a personal loan all at the same time shows that (1) you’ve got a lot going on, but you’re still making ends meet; and (2) you’re diligent with your finances and what you owe.

 

We’re not saying to go right now and over-extend yourself. We’re just saying that your credit portfolio is at its best when you’ve branched out.

 

That takes time, discipline and financial stability, so don’t rush into it. Good credit is about playing the long game.

 

Your employment history matters

Imagine you’re applying for an auto loan. Most auto loans have terms from four to seven years. When you think about it, that’s a long time and a lot of monthly payments.

 

If you tend to job-hop, meaning you frequently jump from job to job, most lenders will wonder whether you can repay a long-term debt obligation. What happens if you leave a job and it takes a long time to find another one? Payments are still due each month.

 

Length of employment doesn’t impact your credit at all, but it does factor into whether you can get approved for a loan.

 

Like a good reputation, strong credit takes time

Your credit is a repeated pattern of behavior. Do your best to make on-time payments. Don’t over-extend yourself. Only borrow what you can afford.

 

Your credit is your financial reputation. It can open new doors for you, and it can leave others shut and locked forever. Protect your credit like you protect your image.

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