How is your credit score calculated?

[elitesystem]

Here is a piece from an email I received from a Credit Councilor's/Repair agency. I thought it was worth sharing.

How is your credit score calculated?
The five most important factors:

35% Payment History – Record of paying bills indicates responsibility of credit.

30% How Much Is Owed – Total amount owed on all accounts as well as how much is owed on different types of accounts (credit card, auto loan, mortgages, and so on). Also, debt/credit ratio.

15% How Long Have Had Credit – You can have a good score with a short history; however, typically the longer one has had credit, the better.

10% The Last Application for Credit – How many accounts have been applied for recently.
How many new accounts have been opened
How much time has passed since applied for credit
How much time has passed since opened an account

10% Types Of Credit Used – Revolving debts, auto, mortgage, installment loans.

[pheinbaugh2]

The FICO credit score is used by all three major credit bureaus – Experian, Trans Union and Equifax. They are the companies that keep track of the credit and lending transactions of millions of Americans. The score is used to provide, in a nutshell, a figure that represents the credit-worthiness of a consumer. That score, which ranges from a low of 300 to a high of 850, is used in many ways by businesses and employers.

Approximately one third of the score represents the individual’s payment history. Previous loans, and the ability to pay them are shown in this portion of the score. Both late payments and failure to pay at all affect this portion of the score. Those who have paid all of his or her loans on time will obtain the highest scores.


Another third of the score is determined by current debts, and the ratio of debt to the amount of available credit. Keeping all of your credit cards at or near their limits will hurt this portion of the score. This seems obvious; those who are already near their credit limits may have trouble paying back any future loans.


The remaining third of the credit score is determined by three factors – length of credit history, recent credit applications, and the types of overall credit in the individual’s credit history. The length of the credit history is the most significant item, as lenders are more suspicious of borrowers who have not established a pattern of borrowing and repaying loans. A history of repaid loans goes a long way towards fortifying this portion of the score. Recent credit applications, particularly a lot of them, may suggest that the individual is desperate to borrow more money and may have a financial problem. Similarly, the types of credit demonstrate spending patterns and reliability. A credit report containing all credit cards may be seen as more risky than one with a few credit cards, a repaid auto loan and an ongoing mortgage.

[admin]

How long you have a credit it very important aspect because if you have a long credit score let say for a creditor long credit score is 7 years but if you want to remove " inquire" that appear on your credit score saying you have short period of time your credit card you should probably have at least 3 years credit card so this inquire will be erased, don't forget to pay your monthly credit card bill otherwise you will find yourself into financial debt and hard to recover!