The best answer to the question of how your credit score is calculated is that no one knows exactly how the score is determined because credit score models and formulas are closely protected secrets of the companies that generate the credit score.\u00a0 A consumer\u2019s FICO score is the most commonly known credit score, and it is used for
\nunderwriting home loans, car loans, and credit cards.\u00a0 While we do not know the exact formula, we do know key elements of your credit history that are used to generate the credit score. These areas include:<\/p>\n
Your payment history.<\/strong>\u00a0Approximately one third of your credit score is based upon whether delinquent payments have been noted on existing accounts.\u00a0 Keep in mind that Your level of debt<\/strong>.\u00a0 This element is the next biggest factor used to determine your credit score and is believed to be about 30% of the credit score.\u00a0 If you maintain a lot of debt at or near the top of your available credit then your credit score will be adversely affected.\u00a0 It is a better practice\u00a0to refrain from maxing out a credit card and be careful that you do not carry many credit cards at or near the high credit limits.\u00a0 You may also want to avoid signing up for excessive department store credit cards and then charging close to the maximum of your available credit after opening the account.<\/p>\n Your credit history length<\/strong>.\u00a0 Another element of your credit score is the length of your credit history.\u00a0 Obviously longer good credit history is better and more established then shorter credit files. \u00a0Lenders do not like \u201cthin credit files\u201d because they are smaller and therefore harder to rely upon because of the shorter credit history. Personally, I always keep my older credit lines open even if I use the credit line infrequently because I want to have a credit file that has older rather than newer credit accounts.<\/p>\n Your type of credit<\/strong>.\u00a0 This is a\u00a0smaller element of your credit score, but it\u00a0does help determine\u00a0your ultimate credit score.\u00a0 Some lenders believe that getting a loan from a bank is better credit than obtaining a loan from a finance company.\u00a0 Moreover, the scoring models are believed to prefer a mix of installment and revolving debt. Your credit inquires<\/strong>.\u00a0 Many consumers that I speak with regarding credit report inaccuracies in Virginia are overly fixated on their credit inquiries.\u00a0 I have seen reports that credit inquiries are believed to account for as little as 10% of a credit score.\u00a0 Credit inquiries are typically a problem when they are broad based across many different types of credit.\u00a0 If you apply for a mortgage, car loan, department store account, and credit card all in a short time period, the frequency of the applications to different types of credit could negatively impact your credit score.\u00a0 On the other hand, multiple inquires to shop for the best interest rate to purchase one car will probably not have that big of impact on your credit score.<\/p>\n Knowing how your credit score is calculated is important to increasing and protecting your credit score. By knowing the factors, periodically checking your credit file, and <\/p>\n","protected":false},"excerpt":{"rendered":" The best answer to the question of how your credit score is calculated is that no one knows exactly how the score is determined because credit score models and formulas are closely protected secrets of the companies that generate the credit score.\u00a0 A consumer\u2019s FICO score is the most commonly known credit score, and it … Continue reading How your credit score is calculated.<\/span>
\nrecent missed payments and major delinquencies like collection accounts and judgments affect your credit score more than older problems.\u00a0 This does not mean old debts do not hurt you because they do, but more recent deliquency hurts you more.\u00a0 Get current on your bills, and stay current on your bills.<\/p>\n
\nThis element of a credit score is personally my least favorite as I believe this area\u00a0is too subjective, but consumers should be aware that they could be penalized based upon from whom they obtain credit.<\/p>\n
\ncorrecting inaccurate credit reports, a consumer should receive the benefits of
\nbetter interest rates on loans for houses, cars, and credit cards.<\/p>\n