As a trucker, you may need to rely on your credit score to purchase a new rig, make repairs to your truck, or buy tools and other necessary items.
While your credit score is far from the most important part of your financial well being, you should understand the basics and know the issues that affect your good credit.
Informed Trucker: Understand Your Credit Score
How a FICO Score is Measured
Scores are determined by an organization, originally named the Fair Isaac Company and later shortened to FICO. The first thing you need to understand is how your FICO score is measured. FICO uses different factors from your borrowing and payment history to come up with your score.
The most important factor, which makes up 35% of your score, is “Payment history.” You show that you are responsible by paying your bills, and FICO puts the most emphasis on this category.
Next is “Amounts owed” (30%), which tries to determine if a person is overextended. While owing money doesn’t automatically make you a “high-risk” borrower, having a large amount of debt can negatively affect this category.
“Length of credit history” accounts for 15% of your score. This category looks at how long you have been a borrower. If you have a long history of timely payments and responsible borrowing, it will boost your score.
10% of your score comes from “New credit.” Essentially, if you have recently opened multiple lines of new credit over a short period, you could be considered a higher risk.
The final 10% consists of “Types of credit.” Having a variety of credit lines can help your score, but it is not recommended that you open new lines of credit that you don’t intend to use.
How and Why Credit Inquiries Affect Your Score
One of the most commonly debated and misunderstood credit issues is how “credit inquiries” affect your credit score. The truth is, while credit inquiries can make a difference, the shift on your score is almost unnoticeable, if it happens at all.
First, let’s establish what an “inquiry” really is. Any time you or an authorized lender request a copy of your credit report, it counts as an inquiry. The inquiry is then noted on your report.
The issue comes from many inquires over a short period. Studies have shown that opening many credit lines over a short time can present a higher risk, so a score may be lowered if there is a rapid-fire of credit inquiries.
However, placing a few inquiries while applying for a car loan or home mortgage will have little to no effect on your score.
Best Ways to Improve Credit
If you are concerned about improving your credit score, the best way is obvious; pay your bills on time. Setting up your payments to be automatically withdrawn from your bank account may be a good idea. After a while, you will start to see a sharp climb in your FICO score.
Because “Amount owed” is the second-biggest factor, eliminating some of your debt load may also be a good idea. Because your debt load is so important, it may be counter-intuitive to borrow money with the sole purpose of improving your score.
Find a Great Trucking Job Today
Visit our website today to find trucking jobs that are perfect for you! You’ll have the opportunity to find a better job in the trucking industry, become a more prosperous truck driver, and improve your credit. Browse our classifieds now!
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