• Your Credit Score

    Your credit score is calculated through a complex formula. The finer details are not released but the major areas are known.  There are five individual areas and each have their own weight:

    • Payment History – This equates for 35% of your credit score.  It looks at how well you are at paying your bills on time.  It carries the largest weight compared to all other factors.   This is due to the fact that people who don’t pay on time represent a larger default rick on the money they borrow.
    • How Much You Owe –  This looks at how much outstanding debt you have and accounts for 30% of your credit score.  It is defined as utilization and is found by dividing how much you owe by your credit limit.  This is done on sum of all the accounts and by an account by account basis.
    • Your Credit History –  This takes into account two main factors.  What is the age of your oldest account and what is the average age of your accounts?  This is 15% of your credit score.
    • Credit applications – This is 10% of your credit score.  It is when ever your credit report is review.  There are two types hard inquiries and soft inquires.  Hard are when a credit looks at you credit report with the intention of issuing a loan.  Soft is anything else like when you, an employer, or insurance companies looks at your credit report.  Hard inquires are the only ones that count.
    • Credit Mix – This is the last part of your credit score, 10%.  This looks at the types of credit you use.  A credit score should have a healthy mix of credit.  You should have not just credit cards but other types of credit like an installment loan, mortgage, or auto loan.