subject: The Big Five: Statistics That Determine A Credit Score [print this page] A credit score is a amount between 300-850 that is used by mortgage lenders, merchants, and credit card companies to decide your amount of credit, your interest fees, and additional important financial information. The Fair Isaac Company (FICO) is the standard agency in establishing credit; it's used by nearly everybody who checks credit scores. The closer your FICO credit score is to 850 the better.
The first, and most important factor determining your credit score is whether or not you pay your bills in a timely fashion. Paying the minimum payment on all your accounts each month is enough to keep this rate positive; as it stands for 35% of a credit score, it is important to do this. If you have a bankruptcy in your history, or have ever failed to pay expenses in a timely fashion, or have delinquent accounts of any sort, your credit will be affected negatively.
The second most substantial part of your credit score is the amount between your balance due on accounts and your entire credit limit. This includes the kind of balance payable, the quantity of accounts payable on, and the total balance owed across all accounts. Credit agencies see as negative, all credit cards where over 50% of the individuals line is payable as a outstanding balance. The more credit cards a person has where greater than 50% of the limit is owed the worse it influences a person's credit score.
15% of your credit score is dependent on the duration of your credit history. Older people might have superior credit just because their credit history is so much greater. For this reason, cutting up credit cards that you don't use is a far better idea than canceling your cards. The duration of credit history will probably affect young people the most; if you possess no credit history to speak of, then it's length becomes more important.
The last 20% of your credit score is split evenly between the amount of newly established credit applications and the variety of accounts already possessed. Both factors influence the total credit score equally; meaning, both stand for 10% of a total score. A person should, therefore, be cautious of opening too many accounts at one time, and start many different sorts of accounts over time. For example, a major credit card, a department store credit card, and a line of credit paid monthly are all likely to have a constructive influence on your credit score if began over an extended period of time.
Individuals who have a tough time understanding the credit score are not by themselves. Your score will be higher if you pay your bills on time, keep your balance due to lower than 50% of your credit limit, and have a variety of accounts.
The Big Five: Statistics That Determine A Credit Score
