The 5 Factors of Your Credit Score

5 Factors that Determine Your Credit Score

The higher FICO score you have, the better interest rate you'll get on your mortgage. Your FICO credit score is calculated based on these five categories. For some groups, the importance of these categories may vary; for example, people who have not been using credit long will be factored differently than those with a longer credit history. The three companies that report credit scores to lenders are Equifax, Experion and Transunion.

Your FICO Score only looks at information in your credit report
Your credit score is calculated from 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.

1. Payment History (35%)

The first thing any lender wants to know is whether you've paid past credit accounts on time.      This is one of the most important factors in a FICO® Score.

2. Amounts Owed (30%)

Having credit accounts and owing money on them does not necessarily mean you are a high-risk borrower with a low FICO® Score.

3. Length of Credit History (15%)

In general, a longer credit history will increase your FICO® Score.      However, even people who haven't been using credit long may have a high FICO Score, depending on how the rest of the credit report looks.

Your FICO Score takes into account:

  • how long your credit accounts have been established, including  the age of  your oldest account, the age of your newest account and an average age of all your accounts
  • how long specific credit accounts have been established
  • how long it has been since you used certain accounts

4. Types of Credit in Use (10%)

The score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans.

5. New Credit (10%)

Research shows that opening several credit accounts in a short period of time represents a greater risk - especially for people who don't have a long credit history.

FICO scores can range from 300-850. Typically, a credit score over 720 is often considered an excellent score.  A score of 680-719 is considered good. A score that falls beween 620-679 will ususally make the lender heavily analayze the file. Having a score that falls between 585-619 will usually disqualify you from getting the best rates. A score below 584 will deter lenders from working with you.

Tips to Increase Your Credit Score:
         - Pay off your bills on time every month.
          -Pay off all of your existing debt.
          -Unused credit cards should not be closed. This can sometimes lower your credit score.
          -Open credit only as needed. Do not open a bunch of new credit card accounts in a short period of time.

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