Many often wonder what makes up their credit scores. Just how exactly do the credit bureaus arrive at that specific number for you? Roughly, your credit score is weighted like this...
* 35% - Payment History: Late payments and delinquent accounts hurt, even if your account is currently all caught up. If you’ve been 30, 60, 90 or more days late paying anytime in the past 7 years, then it’s going to lower your credit score. The more recent the mark, the worse it is. Debt defaults, collections and bankruptcies also hurt you here.
* 30% - Debt to Credit Limit: Each open credit account should report to the bureaus once a month. The bureaus then look at your total debt from all accounts and divide it by the total credit available to you. This gives you a percentage called the Debt-To-Limit ratio, and if it’s over 33% you’re going to see your score lowered.
* 15% by Length of Credit History: If you open a credit card account, plan to keep it active for 4-10 years. Accounts that are quickly shut down will lower your score, while older accounts will give it a boost.
* 10% by Recent Credit Approval: Believe it or not, getting approved to borrow more money can actually raise your score... and make it easier for you to borrow even more! But only up to a point - too much credit available will eventually lower your score.
* 10% by Types of Credit Used: You can raise your score by using multiple types of credit. If you just stick with a credit card, your score will be lower than it could be.
Just knowing what helps or hurts your score most will help you prioritize what needs to be done to raise your score. Now that you understand your score, it's time to begin working to repair or improve it. Be sure to take a look at our program, since it is the easiest, fastest and least expensive way to improve your credit.