What Makes Up Your Credit Score?

Your FICO© Score is calculated from several types of data in your credit report. This data is grouped into five categories, weighted in terms of importance. There are numerous actions you can take to positively influence your credit score in each of these areas. 1.Payment History (35%) Thirty-five percent of your credit score is made up by your payment history, which includes late payments, collections and even bankruptcies and tax liens. Each type of account stays on your credit report a specific amount of time, and each negative item can hurt your score differently. Credit Management Specialists works to remove accounts that are not 100% accurate or 100% verifiable. Our removal rate of inaccurate items is 70%. 2.Debt Ratio (30%) Your debt ratio is the amount of revolving credit (e.g., credit cards) that you owe in relation to the amount of credit you have available (your credit limit). For instance, if your current balance is $2,000 and your credit limit is $10,000, your debt ratio would be 20%. A history that includes several cards showing small monthly balances is generally more favorable than a single card that’s maxed out every month. 3.Length of Credit History (15%) The length of time you’ve had credit (longer is better) is important. At face value, this factor seems like something you can’t do anything to fix. However, there are several ways you might hurt yourself. If you close out your older cards—even if they have higher interest rates—you’ll hurt your score. The credit scoring model has no memory of credit cards you close: If you close out that 15-year-old card, you’ve shortened your credit history. 4.Types of Credit Used (10%) Types of credit include revolving credit (credit cards, retail accounts), installment loans and mortgages. By keeping different kinds of credit open, you show creditors that you are responsible and able to handle different types of financial obligations. 5.Inquiries (10%) Inquiries are recorded on your credit report whenever you ask for new credit (e.g., when you apply for a home loan or a new credit card). In general, a lower number of inquiries is better—especially if you’re opening an account only to get a free gift or a good deal on a purchase and you don’t intend to use the account. Inquiries you make and unsolicited offers do not count against your score, but they do show up on your report. When searching for a home, you are allowed unlimited inquiries over a one-month period because it’s assumed you are rate shopping.