35%
of the score is based on your payment history. This
makes sense since one of the primary reasons a lender wants to see the score
is to find out if (and how timely) you pay your bills. The score is affected
by how many bills have been paid late, how many were sent out for collection,
any bankruptcies, etc. When these things happened also comes into play. The
more recent, the worse it will be for your overall score.
30%
of the score is based on outstanding debt. How
much do you owe on car or home loans? How many credit cards do you have that
are at their credit limits? The more cards you have at their limits, the lower
your score will be. The rule of thumb is to keep your card balances at 30% or
less of their limits.
15%
of the score is based on the length of time you've had credit.
The longer you've had established credit, the better it is for your overall
credit score. Why? Because more information about your past payment history
gives a more accurate prediction of your future actions.
10%
of the score is based on the number of inquiries on your report.
If you've applied for a lot of credit cards or loans, you will have a lot of
inquiries on your credit report. These are bad for your score because they indicate
that you may be in some kind of financial trouble or may be taking on a lot
of debt (even if you haven't used the cards or gotten the loans). The more recent
these inquiries are, the worse for your credit score. FICO scores only count
inquiries from the past year.
10%
of the score is based on the types of credit you currently have.
The number of loans and available credit from credit cards you have makes a
difference. There is no magic number or combination of types of accounts that
you shouldn't have. These actually come more into play if there isn't as much
other information on your credit report on which to base the score.
Is
credit standing between you and the purchase of your new home?
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