What Factors Make Up My Credit Score?

FICO® and VantageScore® use proprietary algorithms to produce your credit scores. While there are multiple FICO® score models for each of the 3 bureaus (28 among the three), both FICO® and VantageScore® base your scores on the data currently listed on your credit report on any given day. Fair Isaac Corp. (FICO®) was created in 1956 by William Fair and Earl Isaac. According to FICO®, the following 5 primary factors make up your credit score in all models

  • Payment History:
    Since 35% of your score is reflective of your payment habits, it makes sense that on-time bill payment should be priority one in building and maintaining a high credit score.
  • Credit Usage:
    While most so-called “experts”, as well as each of the 3 major credit bureaus, recommend using no more than 30% of your total credit card limit to avoid lowering credit scores, using below 20% of the limit will produce significantly higher score results. Why this information is not published by the bureaus will be explained in another publishing called: The Credit Bureaus Number One Client. Your credit utilization percentage is responsible for about 30% of your score.
  • Historic Length / Age of Credit:
    As your credit items age, scores will increase. The length/age of your credit history accounts for about 15% of the score. Those new to credit (“Thin Files”) would normally need to wait it out to benefit from this aged record increase in scores, but there are ethical and legal ways to take advantage of this increase as explained in another publishing titled: How to Legally Age Your Credit.
  • Credit Types / Mix:
    While account balances and payment history combined account for up to 65% of your total credit scores, the types of accounts you maintain are responsible for about 10% of credit scores. Credit scores are enhanced when there is a healthy mix of different credit types. These types might include a combination of revolving credit accounts (accounts with usage limits and varying balances and payments), and fixed payment installment loans (like an auto loan/lease). To learn more about adding these items, see our article titled: Why Is My Credit Score So Low?
  • New Credit And Inquiries:
    Applying for a car loan, credit card, furniture, or even adding cable service or a cellphone account will likely result in one or more hard inquiries. Hard inquiries typically lower your credit score by 0-15 points. The damage (if any) caused by inquiries will usually fade as each month passes. If you use a credit monitoring service to check your credit, no inquiry will show, nor will it impact your scores. Our readers can obtain a “No Inquiry” 7 Day Trial which includes all 3 Bureaus and VantageScores® for $1 HERE. Credit applications and new accounts may affect your score as much as 10% whether or not the inquiry results in approval.



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