What is a Credit Score?

The very words “Credit Score” scare most people because people are scared of the unknown. Seriously, think back to grade school and ask yourself: Did anyone ever teach me anything about my credit score? Answer is NO! Even though your credit score mandates your entire lifestyle and ability to finance a home, vehicle, or invest without capital; Uncle Sam doesn’t think it’s important! Therefore you have never been taught unless you have thoroughly researched it on your own or paid for your degree. The bottom line is, if you have a low score, you can count on high rates, high fees, high payments and rejection. A high credit score can almost guarantee that you are offered the best rates, lowest fees and most desirable terms, get your score up there and any lender rolls out the red carpet.

Understanding how your score is calculated can help you better understand how to improve your score.
Your credit score is calculated using a sophisticated scoring model which takes into account a wide variety of factors. We have grouped these factors can into five categories as outlined in the pie chart below. The percentages in the pie chart reflect the important of each category in determining your score.

Payment History

  • Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.)

  • Number of past due items on file

  • Presence of adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items)

  • Severity of delinquency (how long past due)

  • Amount past due on delinquent accounts or collection items

  • Time since past due items (delinquency), adverse public records (if any), or collection items (if any)

  • Number of accounts paid as agreed


Amounts Owed

  • Amounts owed on accounts

  • Amount owing on specific types of accounts

  • Lack of a specific type of balance

  • 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

  • Time since accounts opened

  • Time since accounts opened, by specific type of account

  • Time since account activity

New Credit

  • Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account

  • Number of recent credit inquiries

  • Time since recent account opening(s), by type of account

  • Time since credit inquiry(s)

  • Re-establishment of positive credit history following past payment problems

Types of Credit Used

  • Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)

Keep in mind……

  • A score takes into consideration all these categories of information, not just one or two.

  • No one piece of information or factor alone will determine your score.

  • The importance of any factor depends on the overall information in your credit report. For some people, a given factor may be more important than for someone else with a different credit history. In addition, as the information in your credit report changes, so does the importance of any factor in determining your score. Thus, it's impossible to say exactly how important any single factor is in determining your score - even the levels of importance shown here are for the general population, and will be different for different credit profiles. What's important is the mix of information, which varies from person to person, and for any one person over time.

  • Your FICO score only looks at information in your credit report.
    However, lenders look at many things when making a credit decision including your income, how long you have worked at your present job and the kind of credit you are requesting.

  • Your score considers both positive and negative information in your credit report.

  • Late payments will lower your score, but establishing or re-establishing a good track record of making payments on time will raise your score.


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