1. Payment History (35%)
It is essential to pay your credit bills on time. Every 30 days late, collection, judgment, or Bankruptcy significantly drops your credit score.
2. Amount You Owe Compared to Balances (30%)
Your available credit compared to the amount owed. It’s a good rule-of-thumb to be at 40% or less of the available balances.
3. Length of Credit History (15%)
As a rule-of-thumb: the longer your accounts are open, the more positive impact it has on your overall credit score. In fact, if you happen to have a card that is over 10 years old with even a little activity, it would probably be a good idea to keep the account open.
4. Mix of Credit (10%)
Generally, if you have loans, such as a car loan or open credit cards, it helps prove to creditors that you have experience borrowing money.
5. New Credit Applications (10%)
There is a model that compensates for people shopping rates on home and car loans, but it can harm your credit score to have multiple reports pulled in a short amount of time.
Factors That DO NOT Impact Credit:
- Employment History
- Marital Status
- If you’ve been turned down for credit
- Length of time at current address
- Whether you own a home or rent
- Information not contained in your credit report
Several factors can be used to establish credit initially, including bank accounts, employment history, residence history and utility bills.
Although they are not reported directly to credit bureaus, bank account history is important to lenders for first time loans and should be kept in good standing.
While they are also not reported to credit bureaus, utility bills (such as electric, telephone, cable and water) can show a lender the risk associated with a new borrower.
Credit may be initially established through a bank, where a credit card is linked to a specific amount of money deposited in the bank. If the credit card is not kept in good standing, the bank can then take the secured funds for payment.
Initial credit may also be established for example with a department store credit card, but borrowers should be cautious of the high interest rates associated with these cards and pay off the balances in full.