Finance Tips and Notes

There are five pieces of information the credit bureaus use when calculating your score. Here is the list and the approximate value they carry into the bureaus scoring model.

1. Payment History (45%)

This is the area in which negative listings on your credit report are counted. It will help your score if you can remove all the negative listings.

However even if you have bad credit listed here, if the account is more than 4 years old it will not be weighted as heavily. In addition having positive payment history here will reduce the impact bad credit items have.

2. Available Credit to Debt (30%)

This is your available credit versus the amount of debt you have. It will hurt your score if you are using all of your available credit.

The bureaus like to see available credit. This shows them that you are a responsible user of credit.

3. Length of Credit (5%)

How long have you been using credit? If you are a newbie to the world of credit you can still have a good score.

Do not worry about this aspect. Your use of credit will age naturally and this will not impact your score enough to make any concerted effort.

4. Credit Experience (5%)

What are you accounts on credit in? Do you only have credit cards?

The bureaus like to see diverse accounts. However this is such a small piece of your score that it is not worth opening up new accounts to show this.

You will have various account you use your credit on in time. You will have different loans for automobiles, boats, houses and etcetera.

5. Pursuit of New Credit (15%)

How often is your credit being checked? Are you frequently having your credit run?

It will help your score if it does not appear that you are frequently applying for new credit. The bureaus do expect to see a number of credit inquires however excessive inquires will lower your score.

However there are individuals that literally open new lines of credit every month. These people will have their score lowered because there credit is constantly being checked.

Each credit bureau has a unique scoring model. Thus these corresponding weight values are simply estimates. If you concentrate your efforts on removing negative items from your credit report and build a positive payment history you can achieve a 700 credit score.

Tags: financial notes