Important Factors Effecting Your Credit


In 2009, changes were made in the way credit scores are calculated. To make the most of your credit, you need to know exactly how your credit score is calculated. There are five components to your score and some carry more weight than others.

  1. Payment History – In the past this has been the largest factor in your credit score. This comprises 35% of your credit score.
  2. Amount Borrowed Compared to Available Credit – Now a bigger factor in your credit score. This comprises 30% of your credit score. It is better to owe a small amount on different cards than to have one card that is maxed out.
  3. Length of Credit History – Raise your credit score by keeping accounts open over 7 years. Your length credit history comprises about 15%. Instead of closing accounts, pay them off and leave them open with a small amount of activity that gets paid off each month.
  4. Inquiries and New Debt – These lower your credit score. These make up about 10% of your credit score. For house shopping, all mortgage inquiries within 30 days are grouped together as one inquiry. For auto loans, all inquires within 14 days are grouped together as one.
  5. Types of Debt – Installment debt is more favorable to your credit score than credit card debt. This comprises 10% of your credit score.

It may seem daunting to get a handle on your credit situation but there is help. Contact a Financial Education Service Agent to find out how to resolve the negative issues impacting your credit report.