The Five Most Important Factors of Your Credit Score

• Each factor might weigh more or less heavily in your individual score, depending on your credit situation:

1. Your Payment History
   1. This makes up about 35 percent of the typical score.
   2. According to Fair Isaac & Co., six out of ten Americans don’t have a single late payment on their credit report.
   3. When it comes to negatives like late payments, the score focuses on three factors:
      1. Recency – this is how recently the borrower was in trouble.
      2. Frequency – this is how frequently the borrower has been in trouble.
      3. Severity – this is how serious the trouble has been.
2. The Amount of Debt
   1. This makes up about 30 percent of your score. Total amount owed is examined, as well as the different types of debt involved.
   2. Maxing out your credit limit, or even coming close, will inevitably hurt your score.
   3. The greater the difference between your credit balance and your limit, the better.
3. The Amount of Time You’ve Carried Credit
   1. This is fifteen percent of your score.  The longer you’ve had credit, the better.
   2. According to Fair Isaac, the average American has carried credit for fourteen years.
4. How Many Times You’ve Applied for Credit
   1. This is ten percent of your score.
   2. The more times you’ve applied for credit in a short amount of time - without a long credit history - the lower your score.
   3. According to Fair Isaac, the average American hasn’t applied for credit in the past 20 months.
5. The Variety of Your Credit
   1. This is 10 percent of your score.
   2. Fair Isaac doesn’t explicitly reveal what they regard as a positive credit mix, although they do say you don’t necessarily have to have a loan of each possible type.
   3. To get the best possible score, it’s recommended that you have revolving debt, like credit cards, as well as installment debt, like an auto loan.
   4. Bank credit cards are better than store or finance company credit cards.
   5. According to Fair Isaac, the average American has four or five bankcards, and most have at least one installment loan.

Disclaimer: This article is provided for information use only.  It does not take the place of an attorney, a tax advisor, or an accountant.  Always seek out the advice of a licensed professional before undertaking any significant change in your financial situation.