Your credit and debt breakdown and analysis from Credit Sesame is a useful tool. After you sign up for Credit Sesame (it’s free) you you will be able to see your credit standing, how you can improve, and money-saving credit offers to evaluate.
Your Credit Sesame credit score is the VantageScore® 3.0, and the score analysis is based on the data in your TransUnion credit history. Credit Sesame’s report card grading system shows you exactly where to focus your attention to improve your credit score. Mastering your Credit Sesame report card can help you improve your credit score, no matter which scoring model is used.
Here are a few common member questions that might help you navigate the information on your own dashboard.
I have good credit, but my credit mix grade is a ‘C.’ How do I bring this up?
Your credit mix grade is based on the variety of credit products that appear in your credit history, including closed accounts that have not yet aged off your report. If you only have credit card accounts, then your credit mix grade will be a “C.”
You can improve this grade by adding an installment loan. For example, you can take out a personal loan to repay your outstanding credit card debt. An installment loan has a fixed monthly payment for a set amount of time.
The installment loan would add another account type to your credit mix and possibly raise your letter grade. Transferring credit card debt to a personal loan with a lower APR can also save you money and help you to pay off debt faster.
If you do not have credit card debt or any plans to purchase a home or vehicle in the near future, then do not worry about the credit mix grade.
It would be foolish to take on a car loan or personal loan just to improve this grade, especially since this section only accounts for 10% of your score.
Instead, focus more on your payment history and credit usage grades.
In the future, your credit mix will improve when you take advantage of other credit products, like a student loan, a mortgage or an auto loan.
Why is my credit usage grade low if I have very little debt?
The credit usage grade is not based on the amount you owe, but rather how much you owe in relation to the limits on your revolving accounts (credit cards). This is called the credit utilization rate.
Credit utilization is calculated by dividing your credit card balance by your credit card limit (for each card and overall). Most experts recommend keeping your utilization under 30 percent for a healthy credit score; under 10 percent is even better. This is true whether your credit cards have a combined limit of $1,000 or $100,000.
For example, if you have $500 of debt and your credit limit is $1,000, you have a 50 percent credit utilization rate (ok, but not great). Likewise, if you have $10,000 of debt and a $40,000 credit limit, your utilization rate is 25 percent (better).
To improve your credit usage grade on your Credit Sesame profile, you need to do one of two things:
- Decrease debt
- Increase your credit limit
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The second option may be difficult if you already have high utilization on one or more cards. If you want to request a higher limit, contact your card issuer. The request will usually result in a hard inquiry on your credit report, so be prepared for your score to dip slightly. If your issuer raises your credit limit without your request, there is no hard inquiry.
You can also increase your credit limit by applying for a new credit card. Your Credit Sesame profile will suggest credit cards for which we think you have a good chance of approval.
How do I improve my age of credit history score?
Your age of credit history is the average age of all of your accounts, including closed accounts that have not aged off your file yet. The only way to increase your average file age is to close a newer account to push the average up.
Two things that can make your credit age score go down are:
- Opening a new account: When you open a new account, you lower the average age of your accounts. However, your score can recover from this change rather quickly. For example, let’s say you have three cards. Card A has been open for 4 years, 9 months; card B has been open 2 years, 3 months; card C has been open 0 months (brand new). Your average file age is 2 years, 4 months. This should put your Credit Sesame grade at a “C.” However, in 10 months, your average file age 3 years, 2 months, bumping your grade up to a “B.”
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- Closing a credit card account: Closing out a credit card can negatively affect your score (1) if you carry a balance on one or more other cards and closing the account causes your utilization rate to go up, or (2) if it was an older account and closing it causes your average file age to go down. In the latter scenario, how fast your score recovers from a card closure depends on the age of the account you close. For example, if you have two cards, one open 5 years, 3 months and one open 1 year, 1 month, your average account age is 3 years, 2 months. If you close the older card, your average account age is now 1 year, 1 month. This is quite a drastic change, and it will take over a year to recover your previous average file age.
My own Credit Sesame grade for credit age went from a B to a C when I opened up a new card because the average age of my accounts decreased. On the plus side, my credit utilization went below 29 percent, raising my credit score six points.
I’m debt free but my credit score still isn’t excellent. What should I do?
Congratulations on being debt free. While being debt free is a wise choice, your credit score doesn’t always reflect positively on this lifestyle. Thankfully, you do not have to rack up debt to improve your credit score.
First, ask yourself, “why do I want to improve my credit score?” If you plan to apply for a personal, vehicle or mortgage loan in the near future, then it is very important to raise your credit score.
Credit is also important for emergency preparedness. If you are hit with a financial crisis, good credit can help you bridge the gap and avoid financial devastation.
To raise your credit score without saddling yourself with debt, apply for a credit card that offers rewards for spending. Devote this card to a regular expenditure each month, such as gas or groceries.
This will make it easy for you to track. Keep the balance under 10 percent of the credit limit, and pay the bill on time every month (preferably in full).
Credit Sesame’s report card grading style helps you know which credit areas you need to improve on. Your credit score is affected most heavily by payment history and credit utilization, or credit use, so make sure your primary focus is on these two areas.