How Credit Scores Are Figured

how is credit score figured

There was a time in the past when a lender had nothing to go on but the word and reputation of an individual who was soliciting money. Meeting face-to-face with a potential borrower was an important part of effectively sizing him up to determine whether he was the sort of person who would and could repay a debt. Obviously this now seems to be a system with countless shortcomings. It has been replaced with a far more elaborate method of assessing creditworthiness.

The focus of much modern lending is placed squarely upon a person’s credit score. This serves as a means of quantifying the risk that an individual poses to a prospective lender, landlord, service provider, or employer. If credit mistakes have stung you, bankruptcy may offer the solution. Contact the Birmingham bankruptcy lawyers of Greenway Bankruptcy Law, LLC at (205) 324-4000.

Factors that Influence Your Credit Score

Each of the three major credit bureaus uses a different mathematical algorithm to devise its score for an individual.

But because the calculations are intended to relate to real and important concerns there are some aspects of an individual’s financial situation and past credit history that are common to all three.

Some of the factors that influence your credit score include:

  • Payment history on your accounts
  • Outstanding and available balances on existing accounts
  • The length of a person’s established credit history and the age of accounts
  • A diversity of accounts
  • The presence of recent inquiries seeking new loans or credit

If you have recently filed for bankruptcy, this can have an effect on your credit score. However, sometimes this difficulty is worth the financial relief that bankruptcy can provide. If you have any questions about the advantages and disadvantages of bankruptcy, we can help.

Contact Us

Let us help you to identify the best way forward from your state of present financial distress. Contact the Birmingham bankruptcy lawyers of Greenway Bankruptcy Law, LLC at (205) 324-4000.


Category: Credit

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