How Do They Come Up With YOUR Credit Score

Hello there! If you are new here, you might want to subscribe to the RSS feed for updates on this topic.

We all know how important our credit scores are if we have ever tried to finance anything! They can determine just how much interest you will pay and if you will even be allowed to finance that car or home. However, most of us do not know what all is considered when calculating our scores. Knowing this can seriously help you to increase your credit score quickly!

Credit scores range from 300 all the way up to 850. The higher your score the easier your life! If you have a score of 500 and someone else has a score of 800, you could find yourself paying as much as triple for the same item! Not only does our credit score impact the amount of interest we get charged it is now being taken into consideration by potential employers!

So how do they come up with the number? There are numerous factors involved but the following breaks out the largest determining factors that you can actually have an impact upon!

Payment History is about 35% of the criteria. Paying your bills on time really does matter! Having consistent late payments will seriously lower your score!
Credit Utilization is about 30% of the criteria for determining your credit score. This simply means that they look at your credit limits compared to how much debt you actually have. The goal being that you should have a lot more credit available than actually being used. Your debt should be considerably less than your credit limits.
History is about 15% of the criteria. How long have you had a credit history? This shows your spending habits and ability to pay off debt.
Inquiries are about 10% of the criteria. This includes anyone that requests your credit report. This could mean an employer and an application for credit anywhere. The reason this is counted is because if you are applying for credit all over town it could flag that you are experiencing a financial trouble or taking on excessive debt. These are only considered for a period of one year, although all inquiries stay on your report for 2 years.
Credit Mix is about 10% of the criteria. This simply means the different types of accounts on your report. This shows that you have experience managing various types of debt which can work to your advantage as long as it is not excessive.

As you can see a lot goes into determining your credit score! You can literally control all of these factors by paying your bills on time, not using more credit than you absolutely need to be using and only applying for credit when absolutely necessary.

You should take advantage of the fact that each American is entitled to one free copy of their credit report each year. That is one free copy from each of the three major credit agencies, including Experian, TransUnion and Equifax. You want to make sure that the information on these reports is accurate so that your credit score is also accurate! Remember no one else will verify that information for you!