What's Used to Determine My Credit Score?

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Credit scoring can be a mystery, but it doesn’t have to be. While there are many different types of credit scores that lenders use, there are some basic guiding principles to what determines your credit score. By knowing these factors, you can be more proactive in working toward having better credit and a stronger credit score.

Below are the five components that determine your credit score, specifically for a FICO credit score, based on the information in 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. It is also known as your revolving utilization percentage. 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.

Your Credit Age

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 Account Diversity

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.

Whether you’re trying to build your credit or maintain good credit, it’s important to monitor it regularly.  You can check your credit reports from each of the three main credit reporting agencies (Experian, Equifax and TransUnion) for free once a year through AnnualCreditReport.com. And you can check your credit score using Credit.com’s Credit Report Card, which breaks out each of the five elements of credit reviewed above and assigns letters grades for each based on your performance. Keeping a close eye on your credit reports and scores can help guide your credit building efforts by showing you what you need to work on, and can also alert you to errors or fraud that would potentially hurt your credit.


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