Figuring Out the Ever Nebulous Numbers Called Credit Scores

Credit Score Factors

The information contained on our credit reports affect every aspect of our lives; including employment, insurance, and even interest rates (mortgage, credit cards, automobiles, etc.). There is specific information captured on our report which is used to form our credit score:

• Payment History (accounts for approximately 35%)

• Outstanding Debt (accounts for approximately 30%)

• Length of Credit History (accounts for approximately 15%)

• Types of Credit Currently in Use (accounts for approximately 10%)

• Recent Inquiries (accounts for approximately 10%)

Payment History - Your payment history includes the following types of specificInformation:

• Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.)

• Adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items)

• Severity of delinquency. The more recent the problem, the larger the impact on your credit score.

• Amount past due on delinquent accounts or collection items

• Time since and frequency of past due items (delinquency), adverse public records, or collection items

• Number of past due items on file

• Number of accounts paid as agreed

Outstanding Debt - Your credit score is adversely affected if you owe amounts at or near your credit limit, so if possible, split the balance and transfer some of the debt to a second card. A low balance on two cards is better than a high balance on one. (Credit card companies usually charge a 'transfer' fee, but 'reward' you for switching you debt by offering a low interest rate. Sometimes the interest rate offered is for an introductory period only, so make sure you read the fine print before transferring your debts.)

• Amount owing on accounts

• Amount owing on specific types of accounts

• Lack of a specific type of balance, in some cases number of accounts with balances

• Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)

• Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)

Length of Credit History - The longer you have maintained your accounts, the better it reflects on your credit report.

• Time since accounts opened

• Time since accounts opened, by specific type of account

• Time since account activity

Types of Credit in Use - Loans from finance companies generally lower your credit score. According to FICO, this is heavily relied upon when there is little other credit history upon which to base a score.

• Number (or amount) of different types of accounts (i.e. installment loans, credit cards, retail accounts, mortgage, consumer finance accounts, etc.)

Recent Inquiries on Your Report - Recent applications for several new accounts may negatively affect your score. If you inquire about special promotions it does not affect your credit report.

Now that we know what factors the credit bureaus consider when calculating your credit scores, you might be saying to yourself... yeah, yeah, I've heard all that before. Tell me something I don't already know, like how I can raise my score!

With that thought in mind, pay your bills on time. If you have recent late payments on your credit report, lenders view this as you larger credit risk. When you get your bills, don't let this sit on your kitchen table collecting dust. Keep a log of your current bills by due date and the total amount due. Having a late payment appear on your credit report today can have a larger impact on your credit score than filing bankruptcy five years ago!

Manage your credit effective, and don't say... "Duh, that one is obvious". I am definitely stating the obvious here. However, one of the most common ways for consumers to get into a downward spiral credit wise is the poor choices we all have made using the unsecured portion of our credit; CREDIT CARDS. Credit cards do offer immediate relief (or often time's instant gratification) to our needs (or wants). Don't go out buying luxury items if you don't have cash readily available to pay for those items when the bill comes due. That means saying "NO" to plasma screen TV's, new furniture, Gucci watches, and all the items that we "simply can't live without".

Anytime you run a balance on an unsecured credit card or line of credit, it has an impact upon your credit score. By focusing on keeping the balance you carry on your credit cards / lines of credit to less than 25% of your total line of credit, you will be in better shape regarding your credit score.

For more information regarding your credit scores, credit reports or debt options currently available to you, please contact Gateway Credit Connection or visit us online at http://www.creditmonkey.com

Michael Goff is the Co-Founder of Gateway Credit Connection, helping empower consumers to take control of their personal and business finances.

Gateway Credit Connection 15770 Dallas Parkway Suite 1100 Dallas, TX 75248 469.547.4323 Visit us online at http://www.CreditMonkey.com

More Resources

Unable to open RSS Feed $XMLfilename with error HTTP ERROR: 404, exiting

More Credit Information:

Related Articles

Beware of Bogus Credit Repair Companies!
So-called "credit repair" companies claim they can remove negative information from credit reports. Advertising as "Credit Advisors," "Credit Rating Correction Services" or "Credit Consultants," they trumpet variations on this message: "Turned down because of bad credit? We can help!" Many of these companies charge hundreds if not thousands of dollars for the promise to "clean up" bad credit reports.
Your Guide On Choosing a Credit Card To Suit You
Reach into your wallet or purse, pull out a card, swipe, and you're done. It is very easy to use a credit card.
Ways to Look Good without Selling Your Soul to the Credit Card Sharks
1. Buy clothes at thrift stores.
Repair Your Credit - The Right Way!
How to Repair a Bad Credit Rating?The Right Way!If you have a bad credit rating, then you might find that your ability to get financing, loans, and even some jobs is greatly diminished.Once you have a bad credit rating, it might seem like there's nothing that you can do about it? but you don't have to believe that.
How To Repair Your Credit Report
A credit report is run on a buyer when he or she needs to buy something that will take a long-term loan, such as an automobile or a house. The credit report can come from one of three agencies - Equifax, Experian, and Trans Union.
Bank Robbery Growing In U.S.
Bank robbery has grown to become a huge problem in the United States but I am not talking about people robbing banks. I am talking about banks robbing people.
Top 7 Factors to Consider While Reviewing Credit Card Offers
Credit cards have migrated from being hip or convenience product into a must have entity for everybody. Shopping Online you need a credit card.
Credit Damage: Getting Compensated for Your Loss
Until recently lawyers for victims of credit damage had little possibility to collect for damages beyond medical treatment, lost wages and property loss. Insurance companies threw up their hands in sympathy, claiming victims can only be compensated for what can be measured - tangible goods and services.
Debit Card vs. Credit Card, What Are The Differences ?
Ah, the "good old days". If you are a baby boomer, like me, then you probably remember how important it was to rush to the bank on payday.
How To Survive In A Plastic World, Qualifying For Credit Card
Let's face it, having credit is no longer a choice. "Don't leave home without it" is more like "can't buy a home without it.
Can You Acquire Good Credit Overnight? You Bet
Your credit file may not reflect all your credit accounts. Although most national department store and all-purpose bank credit card accounts will be included in your file, not all creditors supply information to credit bureaus : Some travel, entertainment, gasoline card companies, local retailers, and credit unions are among those creditors that don't.
Your Credit Rating and How To Check It
There is a lot of confusion surrounding UK credit ratings, credit scores, credit blacklists, credit reports, and credit files. This guide to your credit rating aims to give you the facts you need.
How Your Credit Rating Affects You, and How to Check It
You might not know it, but every time you take out any kind of loan or credit or pay something back, it gets counted on your credit rating. Who keeps a record on you will vary according to where you live, but the big three credit reference agencies are Experian, Equifax and Trans Union.
Identity Theft - Monitor Your Credit Report
The recent security breach at credit card processor CardSystems Solutions has many consumers worried. Thanks to a well-placed computer virus, nearly forty million credit card numbers were stolen, and cardholders nationwide are justifiably concerned about identity theft.
Practical Suggestions for Protecting Yourself From Identity Theft
It's no surprise that thousands of Americans are victimized by identity theft each year. Last year more than 9,000,000 people were victims of identity theft amounting to some $45 billion dollars.
Credit Cards: Pros and Cons
Sure, there are a lot of problems with credit cards, but there are a lot of good things attached to them as well. For instance, if you have a small business, fleet credit cards can keep your books in order when you issue them to drivers of company vehicles for gas and automobile repairs.
Beware of Falling Minimum Payments
If you opened a credit card statement recently and were pleasantly surprised to find that your minimum payment due was lowered, don't be so quick to "jump for joy". What may appear as a small boost to your monthly budget is actually the rock that can weigh you down in debt for a lifetime.
Restore Your Credit Rating And Reduce Your Debts
Your credit rating affects many areas of your life. Opening new credit accounts, buying a home or car, getting a new job, and receiving discounts on insurance rates are just a few of the things that are impacted by your credit score.
Credit Score: The Brightest Feather In Your Financial Cap
Credit scores are the most important aspect that determines your financial future. Carrying a good credit score is an asset and can pave your future towards greener pastures.
Credit Cards
Credit cards are a form of unsecured credit. The issuer isextending you a line of credit, usually tacking on all sorts of little surprises in the fine print.