Want better credit? Find out what makes up a credit score
If you want good credit it is vital to know the factors that go into it. Without this knowledge it is easy to waste time, energy and money by making simple mistakes and following bad advice. Knowing the parts of a credit score will allow you to take proper and disciplined steps to fixing and maintaining good credit.
By addressing as many parts of the credit score as possible, as well as the underlying factors affecting your credit, West Texas Credit Advisors aims to provide the best and most comprehensive approach to fixing your credit!
To know your real credit standing you need to get your FICO scores. (See our website for more information about how you can stay away from FAKE scores and get the most accurate credit scores on the internet.) The five parts of a FICO credit score are listed below, also check out FICO’s website from which the following information is largely derived:
Payment History – 35% of your score
- Have you paid your bills on time? Have you been delinquent? If so then by how much? And how often?
- Payment information for specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.)
- Do you have public records (bankruptcy, judgments, suits, liens, wage attachments, etc.), collection items, and/or past due items?
- How bad is the delinquency – how past due are you or have you been?
- Amount past due on delinquent accounts or collection items
- How long has it been since you were past due on specific types of items, whether adverse public records (if any) or collection items (if any)
- How many past due items you have
- How many accounts you pay as agreed
Amounts Owed – 30% of your score
- How much you owe on accounts
- How much you owe on specific types of accounts
- Lack of a specific type of balance, in some cases
- How many accounts you have with balances
- Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)
- Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)
Length of Credit History – 15% of your score
- How long it has been since you opened your first account
- How long accounts have been open by specific type of account
- How long has it been since you used certain accounts
New Credit – 10% of your score
- How many accounts you have recently opened, and proportion of accounts that are recently opened (by type of account)
- Number of recent credit inquiries
- How long it has been since an account was opened, by type of account
- How long it has been since recent credit inquiries
- Re-establishment of positive credit history following past payment problems
Types of Credit Used – 10% of your score
- Number and mix of various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)
Things to remember:
1) Credit scores are extremely complex and take into consideration all the factors listed above. No one factor can be isolated from the others, generally when one account changes (even just a little) every factor is altered in some way. This means that no one piece of information alone will determine your score. Since credit scores are subdivided into groups with similar characteristics it also means different things will be important for different people and the same factors can have different weights for different people.
2) Lenders will look at much more than your credit score when determining if you can get a loan. Income, salary, job history, etc. do not figure into the credit score itself, however lenders will certainly consider these when determining your creditworthiness. This is a main reason why being ‘creditworthy’ has to go beyond just having a high credit score.
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