Who are the players?
Three major credit bureaus, Equifax, Experian, and Trans Union, compute consumer credit scores. Each one of these companies have their own statistical model that they use to calculate scored based on your personal credit history.
There are approximately thirty variables that are utilized in the determination of your score. Certain factors, like your credit card and loan payment histories, are going to bear more impact than other aspects of your credit history. It is also important to consider that every person is different and that a factor that may be important to your score may not have as much of an impact to someone else as a result of disparities in your credit past. In addition, the importance of each factor will changes as your credit report changes and has updated information added.
There are five wide-ranging areas that credit bureaus will look at when computing scores. Below are the percentage splits.
- Outstanding Debt - The total amount that you owe compared to your available credit limit makes up 30%. Total amount owed and
the ratio of what's owed to your credit limit is factored in for another 30%.
- Payment History - Neglect to make a credit card, loan, mortgage, etc. payment on time and expect your to be negatively impacted. In fact your payment history makes up about 30% of your total score.
- Pursuit of New Credit - Any application of credit, the status of new accounts and how new these accounts are make up 10% of your score. * Credit History- How long have you been building a credit history? How long have specific accounts have been established and how long have you used each account? On average, this category determines about 20% of your score.
- Category of Credit Being Used - 10% of your score is going to be determined by what kind of credit you are utilizing. Specifically, how may accounts you have and what types of accounts, i.e. installment loans, credit cards, department store cards, etc.
What is a FICO Score?
Importance of Checking Your Credit Report Once a Year