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 specific Information:
? 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:
 Boston Globe | Former Credit Suisse broker arrested in US Swissinfo, Switzerland - A former Credit Suisse broker has been arrested for fraud and conspiracy over deceptive sales of subprime-related auction-rate debt in the United States. ... Former Credit Suisse broker charged with subprime-linked fraud in ... UPDATE 1-FBI arrests ex-Credit Suisse broker Bulgarian Wall Street broker indicted |
S&P cuts O'Charley's credit ratings CNNMoney.com - S&P on Thursday cut the company's corporate credit rating to "B+" from "BB-" and its senior secured credit facility rating to "BB" from "BB+. ... Cut north-west or bust Upstate NY water authority rated AA |
 CEP News | S&P upgrades Raytheon credit ratings 1 notch CNNMoney.com - S&P upgraded the company's long-term corporate credit rating to "A-" from "BBB+." The outlook is "Stable." The Waltham, Mass. ... S&P puts Fifth Third on credit watch Credit rating soars in District 300 Starbucks downgraded to 'BBB' on weakening credit metrics - S&P |
When the Bank Closes Your Credit Account Washington Post, United States - By Joan Goldwasser Q I received a notice from Capital One that it is closing my credit card account because of inactivity. If the company closes the account ... Capital One Spurned Mortgages For Credit Cards - CFO |
The Upcoming Technology of RFID For Contactless Access Control ... MarketWatch - This technology is now being rolled out in the UK and around the World for so called 'BioMetric passports' and credit cards because there are no physical ... |
Credit Crunch: The Sequel U.S. News & World Report, DC - And that certainly seemed to be the case in March when investment bank Bear Stearns became the highest-profile victim of the credit crisis. ... UPDATE 1-US banks' direct borrowing hits record in week UPDATE:Comml Bks Set Record For Avg Discount Window Borrowing The Market: What the Pros Are Saying |
 CBC.ca | Canada bank CEOs see more credit crisis uncertainty Reuters - By Lynne Olver CALGARY, Alberta, Sept 5 (Reuters) - Fallout from the US subprime mortgage crisis and subsequent credit crunch has left nagging regulatory ... Markets still rocky but underlying environment 'benign': Deutsche ... |
 Minyanville.com | As the Credit Strains Linger, Pimco’s Gross Calls for Intervention New York Times Blogs, NY - Banks and businesses are still having trouble raising money, according to data on Thursday that reinforced the prospect that the year-long US credit crisis ... Freaky Friday Potpourri: Help Wanted in Washington! Pimco's Bill Gross hits the panic button 'Financial Tsunami' To Engulf Markets, Says Pimco's Gross |
Credit Suisse appoints India investment banking MD Hindu Business Line, India - MUMBAI: Credit Suisse on Friday announced the appointment of Mr Pankaj Kalra as the Managing Director of its India investment banking department. ... Credit Suisse hires Merrill banker in India Credit Suisse appoints Pankaj Kalra, MD, investment banking Merrill Lynch Hires Dick Barrett and Mark Ellman to Strengthen ... |
 Ottawa Citizen | UPDATE 2-Lehman credit spreads widen amid KDB speculation Reuters - Lehman's credit default swaps rose 20 basis points to 345 basis points, or $345000 per year for five years to insure $10 million in debt, from 325 basis ... Credit crunch: Small Korean bank in $6bn bid to rescue Lehman Southpaw: Blood now, pay later: banks get ready for bonus season Lehman nears rescue deal with KDB |
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