Do you ever wonder how credit scores are calculated? What are the credit reporting bureaus are looking at when they come up with a score for you?
In general, the credit bureaus look at the following factors:
Payment History – This accounts for 35% of your credit score. Also, the credit bureaus look for positive trends. If your recent history is much improved over past history, that will increase your score.
Balance – This accounts for 30% of your credit score. High credit balances aren’t great. A balance of over 75 percent of your available credit will definitely hurt your score. Multiple cards with smaller balances look better to the credit bureaus than one card at its limit.
Credit History – This accounts for 15% of your credit score. Several (3 to 5) lines of credit and a loan with a long history look good.
Type of Credit – This accounts for 10% of your credit score. Furniture and appliance store “pay later” credit lines are considered to be higher risk sources of credit and should be avoided.
Number of Inquiries – This accounts for 10% of your credit score. Inquiries to your credit status can shave 5 to 15 points off your score.
Of course, your score can also be impacted by tax money owed, recent bankruptcies, and money owed collection agencies.