What Does Affect a Credit Score?

There are 22 criteria that determine a credit score and the formulas that each credit bureau uses to calculate their respective credit scores are a closely guarded secret. Some of the criteria are fairly obvious, but most are not.Does Affect Credit Score

You can achieve a higher credit score if you understand the criteria for how you are being scored. In a previous post I explained what doesn’t affect a credit score. In this post I will explain what does affect a credit score.

Credit scoring algorithms can focus only on the facts related to credit risk. Credit scores consider a wide range of information and all of that information is obtained from your credit report. The information that does affect a credit score is as follows:

  • Account information such as:

o   Time since accounts opened

o   Time since last activity

o   Average time accounts are open

o   Proportion of old accounts to new accounts

o   Number of accounts with a balance

o   Amount owed on individual accounts

o   Amount owed on all accounts

o   Balance as a percentage of original amount borrowed

o   Utilization rate on revolving accounts

o   Mix of credit type (mortgage, installment, revolving)

  • Account payment information such as:

o   Number of accounts in good standing

o   Number of delinquent accounts

o   Recency of past due items

o   Duration of past due items

o   Amount that is past due

  • Inquiries into your credit history

o   Number of inquiries

o   Time since the last inquiry into your credit

  • Public records such as:

o   Collection accounts

o   Liens

o   Judgments

o   Bankruptcy

While this is a comprehensive list, the items are not listed in order of importance. There is no way to know exactly how many points your credit score will be impacted by any particular item or combination of items. However, you have the power to affect your credit scores by reviewing your credit history and determining which items on this list are affecting your credit score and making modifications to those items. You may not be able to affect each item on the list, but you should be able to affect enough of them to make a positive impact on your credit score.

Your credit score is something you should manage on a proactive basis. Improving your credit score can help you:

  • Get better credit offers
  • Lower your interest rates
  • Speed up credit approvals

Hopefully, you have a better understanding of what a credit score is. For more information on credit and credit scoring download our FREE report entitled “Credit Scoring and Wealth – The Game of Credit.”

I will explain what makes up a credit score in another post so be sure to check back.

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