Credit Scores and their Determining Factors

how is my score calculated?

Your Credit Score is the three digit number that represents your credit rating. It serves as a guide to help lenders predict your future credit performance without having to examine every item on your credit report.

Scores range between 300 and 850 and are commonly referred to as FICO scores (Fair Isaac Co.). It is important to note that the scores that you receive from credit bureaus are not your actual FICO. They are instead that particular bureaus interpretation of your FICO score. 

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Payment History...The fewer late payments, the better. Recent late payments have the biggest negative impact. Many lenders refuse to loan if there have been any late payments in the last six months.

Inquiries...Every time your credit is pulled, and especially when you are denied credit, your score is affected. Too many recent inquiries in a short period of time can be costly.

Types of Credit Used...Varying the types of credit you use will help you immensely. Finance company accounts rate lower than bank or store accounts. Retail accounts, credit cards, mortgages, and installment loans are all viewed differently. Too many of one and not enough of the other can impact your score. 

Length of Credit History...Maintaining older, or more seasoned, credit lines will improve your score. Closing a well seasoned line of credit and opening a new one can drop your score significantly.

Credit Usage...How much do you owe? It is far better to have a few lines of credit with low balances, than to have the same debt consolidated onto one line of credit with a very high balance. Too many open accounts can also have a negative impact.