|
How is my score calculated?
There are generally five main categories that determine your
credit score. A score is
determined by all of these categories, not just a selected few.
These are listed in accordance of the most significant:
1. Past Delinquency/Level of Delinquency: Late pays, charge -offs,
collections, bankruptcy, liens, etc. Obviously, late pays will
not effect your score as much as bankruptcy or charge-offs. As
well as, past delinquencies will not effect your score as much
as recent ones.
2. Debt Ratio: Level of balance on revolving debt to available
line of credit. If your revolving debt, credit cards, are maxed
or close to the limit available, this is considered to be potential
for money problems. Keep your revolving debt at or below 50% of
available credit.
3. Length of Time Credit Has Been Established: The longer the
credit history, the better. Only time will improve this. Keep
good on credit accounts and keep them established long enough
to show stability. Showing a lot of new open accounts with short
credit history is not good. People who have had credit for a long
time are less risky.
4. Inquiries: Too many requests for credit in a short period
of time is looked upon negatively. Do not apply for credit unless
absolutely necessary. Consumers do not realize that when they
apply for any type of credit, this shows as an inquiry on their
credit file for two years, even if they do not get the loan. Furthermore,
comparison shopping for the best loan can hurt you when you actually
apply for a loan. Never apply for a loan just to see what you
qualify for. Get your credit
score to the acceptable range of 660 before applying for a
loan by obtaining your credit reports with your free
credit score.
5. Balanced Mix of Credit: A consumer with a balance of credit
use with revolving, installment, and mortgage loans will have
a higher score than someone with only one type of credit use.
Revolving loans would be credit accounts such as credit cards
and installment loans would be credit accounts such as auto loans.
Someone with only one type of credit use is considered to be riskier.
What does a credit score ignore?
- Your race, color, religion, national origin, sex, or marital
status
- Your age
- Your salary, occupation, title, employer, date employed, or
employment history
- Where you live
- Certain types of inquiries such as promotional, account review,
insurance or employment related inquiries
- Any information not found in your credit report
- Any information that is not proven to be predictive of future
credit performance
What kind of information is a credit score based
on?
Credit scores are based on five main kinds of credit information.
Listed from most important to least important, these are:
- Payment History
- Amount owed
- Length of credit history
- New credit
- Types of credit in use
Does everyone have a credit score?
For a credit score to
be calculated on your credit report, the report must contain at
least one account that has been open for six months or longer.
In addition, the report must contain at least one account that
has been updated in the past six months. This ensures that there
is enough information, and enough recent information, in your
report to compute an accurate score. Your score also will not
calculate if there is a fraud statement on your credit file or
if all trade lines are disputed.
How often does the score change?
Your credit file is continually updated with new information
from your creditors. The credit
score is calculated based on the latest "snapshot"
of information contained in your file at the time the score is
requested. So your score from a month ago is probably not the
same score a lender would get from the credit reporting agency
today. Fluctuations of a few points from month to month are quite
common.
Top of Page
|
