How is a Credit Score Established?
The three main credit bureaus, Transunion, Equifax, and Experion, calculate your credit score in different ways.
Besides some top talent at these companies no one knows the exact process and formulas that are used.
Even still the credit score between the 3 shouldn't deviate too greatly.
Here are the factors that are used to decide a credit score.
How you pay your bills 35% The biggest portion is how you've paid your bills previously.
The newest activity is the most important.
Paying promptly and keeping your accounts current is vital for a great credit score.
How much owed and your usable credit 30% The total amount you owe on your home, credit card, and car loan.
Your credit amount available is also taken into consideration.
If you have several cards near their limits you could be viewed as risky.
Topping out your cards can hurt you.
Hitting your credit limits can harm your score.
Keeping a small balance and paying promptly can increase your score.
Credit history length 15% An established credit pattern is preferred over new credit.
You'll be awarded points for keeping accounts over long periods of time.
Mix of credit types 10% A mix of credit types is a plus.
Showing that you can pay in installments, such as an automobile loan, and paying on credit cards, which is revolving debt, displays flexibility.
Multiple forms of credit is a good thing, as long as you're paying on time.
Apply for new credit 10% This displays that you're interested in acquiring new lines of credit.
Don't go overboard, but new forms of credit as well as your established credit proves growth.
These are the five key components in determining your credit rating.
There's no need to obsess over every individual element but they're necessary to be conscious of.
Pay on time and keep your balances low and you will see your credit score go up.
Besides some top talent at these companies no one knows the exact process and formulas that are used.
Even still the credit score between the 3 shouldn't deviate too greatly.
Here are the factors that are used to decide a credit score.
How you pay your bills 35% The biggest portion is how you've paid your bills previously.
The newest activity is the most important.
Paying promptly and keeping your accounts current is vital for a great credit score.
How much owed and your usable credit 30% The total amount you owe on your home, credit card, and car loan.
Your credit amount available is also taken into consideration.
If you have several cards near their limits you could be viewed as risky.
Topping out your cards can hurt you.
Hitting your credit limits can harm your score.
Keeping a small balance and paying promptly can increase your score.
Credit history length 15% An established credit pattern is preferred over new credit.
You'll be awarded points for keeping accounts over long periods of time.
Mix of credit types 10% A mix of credit types is a plus.
Showing that you can pay in installments, such as an automobile loan, and paying on credit cards, which is revolving debt, displays flexibility.
Multiple forms of credit is a good thing, as long as you're paying on time.
Apply for new credit 10% This displays that you're interested in acquiring new lines of credit.
Don't go overboard, but new forms of credit as well as your established credit proves growth.
These are the five key components in determining your credit rating.
There's no need to obsess over every individual element but they're necessary to be conscious of.
Pay on time and keep your balances low and you will see your credit score go up.
