How your credit score is determined

Everyone realizes that, when it comes to determining your credit score, payment history matters.  What most don’t realize is that payment history comprises only 35% of one’s score.

The second biggest factor, weighing in at 30% considers the amount owed on all accounts versus your total credit line.  Keep the balances on your credit cards under about one-third of the credit limit and you’ll help boost your score a good deal.  Fail to do that, and you’ll work against yourself.

The remainder of one’s credit score is determined by the amount of new credit (a negative factor), length of credit history (the longer the better), and the types of credit you have (mortgages and loans are better than finance company credit or credit cards).  Manage your sources of credit accordingly and your score will benefit. 

And btw, when it comes to payment history, mortgage payments matter most, followed by loan payments and auto leases, and finally credit card payments.  Most other payments don’t factor in as most other creditors (think utillity companies, insurance companies, etc.) do not report to the credit bureaus.  And here’s another thing about payments to keep in mind.  As long as you’re not 30 days or more late with your payment, it will still be reported as having been paid timely.  So, do whatever you can to be certain that all mortgage, loan and credit card payments are received by your creditors within that 30 day timeframe.

Take care of your credit bureau file, and it will take care of you.  If you have questions concerning your specific situation, let me know.