Determining Your Credit Score

While we don’t know exactly how a credit score is determined, we do know that the following items are always considered important:

Payment History (35%)
Your score is negatively affected if you have paid bills late, had an account sent to collection or declared bankruptcy. If you charge up that already outstanding card, they figure that you may not have enough money to pay their bills. The more recent the problem, the lower your score—a 30-days late payment today hurts more than a bankruptcy five years ago.

Outstanding Debt (30%)
If the amount you owe is close to your credit limit, it is likely to have a negative effect on your score. A low balance on two cards is better than a high balance on one.

Length of Your Credit History (15%)
The longer your accounts have been open the better.

Types of Credit in Use (10%)
Loans from finance companies generally lower your credit score.

Recent Inquiries (10%)
If you have recently applied for many new accounts, this will negatively affect your score. Among the items not considered are age, race, gender, education, national origin, marital status and receipt of public assistance.

Your thoughts on this subject? Your comments appreciated!

Content © Rich Brott, 2011

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Reader Comments

I was curious how you came up with or found those percentages on your credit, because I have never seen it broken down in this manner before, and I must say it seems like a very logical weighting. I was thinking the last two may may have more weight with respect to each other depending on the company.