What Factors Determine Your Credit Score?
Whether you are in the market to buy a home, or finance a new car, apply for a personal loan, or simply want to obtain a higher credit limit you need to have your credit up to “lending standard”. You may meet lending guidelines in the form of employment history and sufficient funds to reach your financial goals but that is not always enough. Your credit is one of the most important factors in reaching your financial goals, which is why you must understand how your credit is determained.
The majority of people do not understand their credit reports.
“What determines your score?”
“What is negative information?”
“What is positive information?”
These are all questions I have come across, your credit report is made up of a variety of different components. As a credit specialist, I deal with credit reports on a daily basis. After some research we found what the key factors are in determining your credit score.
It’s important to know that your FICO score is the single most important number used by lenders to determine the risk involved when financing a loan for you. This score will ultimately determine your interest rates, monthly payments, and whether or not you are even approved for a loan.
So What Dictates Your Credit Score?
Payment History; 35%This category makes up the biggest portion of your credit score (35%).It includes all payment information (Positive or Negative) as reported by the creditors to the credit bureaus.
Number of accounts paid on time
Number of past due accounts.
Amount due on delinquent or collection accounts( if any)
Length of both Negative and Positive accounts.
Adverse public records ( Bankruptcy, liens, judgments, etc.)
Debt Amount Due: 30%Debt amounts due makes up (30%) of your score.It is not as simple as adding up how much debt you have because everyone’s financial situation is unique. It has more to do with the percentages, and diversity of the debts owed. For example, if your credit is made up on ONLY credit cards and nothing else this could negatively affect your score.
Amounts owed on accounts
Lack of specific types of credit
Number of accounts with outstanding balance
Amount of debt owed compared to available balance.( usually you want to owe 25% or less of your credit lines)
Length Of Credit History: 15%The length of your credit history makes up (15%) of your credit. Basically, the amount of time that your credit accounts have been open. This also includes recent activity on the accounts Be careful about closing accounts that you have had for a long time.
New Credit: 10%New credit makes up (10%) of your credit score. This makes up newly opened accounts, new credit inquiries etc. It is extremely important to pay your new accounts on time, creditors want to see recent positive payment history after having had past payment problems.
Number of recently opened accounts (as well as type of account)
Number of credit inquiries ( time since inquiries)
Good recent payment history after having had past payment problems.
Type Of Credit: 10%The diversity of your accounts is also taken into consideration. It makes up (10%) of your credit score.This will include the number of accounts and various types of credit such as credit cards, mortgages, auto loans, retail accounts, etc.
This information can be read in full at http://www.nationalchoicecredit.com/ with detailed charts and other useful information.
Contrary to popular belief fixing your credit is not as simple as removing negative items. There is much more that goes into your credit report and score (as mentioned above). Now that you have the knowledge of what determines your score you can get started on putting this information into use to get your credit score to lending standard.
Good luck in all your financial ventures!
-National Choice Credit Solutions Team
Fast Credit Repair
National Choice Credit Solutions knows it is important for comsumers to be educated, read all of our articles to learn more about having and maintaining good credit.
National Choice Credit offers our clients a fresh new program that will help revive your credit and rejuvenate your financial situation. National Choice will work closely with its affiliates to help our clients get guaranteed approvals and achieve true long term credit success. We help our clients reach their financial goals such as purchasing a home. We also work with many mortgage lenders and real estate agents to help their “turn down” clients reach lending standards!Visit our website at http://www.nationalchoicecredit.com/
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