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| What criteria is used to determine my credit score, and how much does each component count? |
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Last Updated
28th of May, 2009
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These are the five components that determining the point values on your credit reports:
- Your
Payment History – This segment is worth 35% of your FICO score points
and is the most important component. Paying your bills on time will
help you boost your score in this category, while late payments and
collection records will hurt your scores. However, it’s important that
you notice that while this category is worth 35% of the points, 65% of
your score is determined by other factors. This means that making all
of your payments on time is not the only thing it takes to earn a great
score.
- Your Debt – This section is worth 30% of your FICO
score. All of your debt balances are factored into your score, but your
credit card debt has the most impact. It is important to keep your debt
balances low in relation to your credit limits in order to maximize
your credit scores.
- How Long You’ve Had Credit – This
category makes up 15% of the points in your score. This segment
specifically measures how long you’ve had credit by looking at the
“opened” dates on your accounts. The older your credit history, the
more points you’re going to earn from this section.
- Your Variety of Accounts –
This segment makes up 10% of the points in your score. In order to earn
as many points out of this category as possible you need to have a
diverse credit history. Diverse in this case means a little bit of many
different types of accounts including credit cards, car loans, student
loans, and mortgages. The only type of account that can be unhealthy
for your credit scores is a finance company account.
- Your
Efforts to Get New Credit – This final section also accounts for 10% of
the points in your scores. When you apply for new credit, a ”hard
inquiry” is posted to your credit file by the lender you applied with.
Having too many inquiries means that you are shopping excessively for
credit and this can lower your scores.
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