How Is My Credit Score Calculated?
Most people have heard of credit scores and realize how they can effect a person’s life. But, many people do not understand how a credit score is actually calculated. To help, we have broken down what makes up a person’s credit score.
1. 30% of Your Score= Amounts Owed
- This takes into account how much money you owe and is based on the percentage of your used credit in relation to your available credit.
2. 35% of Your Score= Payment History
This takes into account whether you have paid past accounts on time and
can include payments on the following:
- Credit cards
- Retail accounts
- Installment loans
- Mortgage loans
- Finance company accounts
3. 15% of Your Score= Length of Credit History
This takes into account how long you have had credit history. Generally,
a person with longer credit history will accumulate more points in this
area. However, a person with less credit history can also achieve a great
amount of points in this area. This area can be based on the following factors.
- How long certain credit accounts have existed
- The length of time since you have used the various accounts
4. 10% of Your Score= New Credit
- This takes into account how many new credit accounts a person opens in a certain amount of time. This can negatively affect a person’s credit score if that person does not have a long credit history.
5. 10% of Your Score= Credit Mix
- This takes into account a person’s mix of credit cards, retail accounts, finance company accounts, mortgage loans, and installment loans. Keep in mind that a persons without credit cards will be viewed as higher risks that those who manage credit cards in a responsible manner.
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