How Do The Credit Bureaus Determine Your Score?

Although credit scoring models can vary depending on the bureau, creditor, and type of credit, the main factors are all pretty consistent. One thing to remember is: one factor can impact the entirety of your credit score.

Here are the main factors you should take into consideration:

1. Do You Pay Your Bills On Time?: Payment history makes up 35% of your credit score, it is THE largest determining factor. Paying bills late, having bills go to collections, or declaring bankruptcy will all have significant negative impact on your score.
2. Do You Have A Long Credit History?: The "age" of your credit accounts for 15% of your credit score. The longer you have an account in good standing, the better it looks on your credit report. The ideal "age" of a credit account, according to the bureaus, is 12 years or older.
3. Have You Applied For Credit Recently?: Credit inquiries account for 10% of your credit score. Too many recent inquiries will be a red flag to lenders and bureaus, indicating to them that you are impulsive with financial decisions. Only apply for credit when you really need or want it.
4. What Is Your Outstanding Debt?: Credit usage makes up 30% of your credit score. It is important that you are not maxing out your credit cards, and if possible paying balances off within each payment term. That being said, you do want to use your credit accounts frequently enough to report to the bureaus and show positive activity.
5. What Type Of Credit Do You Have?: The variety of credit in your report accounts for 10% of your score. Ideally, you want to have different types of credit lines/accounts reporting positively on your report - such as a mortgage, an installment loan, and revolving credit (credit card).

How Far Can Good Credit Take Me??

As we briefly discussed above, your credit score can impact your life immensely. Many of our clients are trying to get approved for a house, trying to buy a car for their family, or even open a business. All of these things will require a lender to examine your credit report line-by-line. And the lenders WILL examine it line-by-line - everything from your address to the inquiries on your report. Taking the time and energy to improve your score can make a huge difference for you.

Want to Know How to Take Your Personal Credit to the Next Level?

We hope this information was useful to you, but if you want to take the next step in improving your credit score and your financial health, we have some additional resources for you....

If you would like a more in-depth guide to improving your credit, we have an amazing new e-book, "The DIY Credit Restoration Guide", including, "The Shocking Truth of What LexisNexis Has on YOU!" You can use it to take your credit to the next level. VISIT OUR ONLINE STORE for more information.

Thinking About Starting A Business? Want to Know More About Business Credit?

We provide a comprehensive assessment and consultation to discuss your best path toward financial success for your business. Complete our Business Assessment today and get a jump start for your business! CLICK HERE to complete the assessment.

And we have a NEW E-Book to help guide you through the process of establishing business credit and obtaining funding for your business, "The Business Credit and Financing Guide" by HOPE BSG now available in our online store!

Whether you are a self-paced learner and want to take each step of the process at your own rate, or you just want to learn more about the world of business financing and how to take your business to the next level - this book is for you.

One more thing...

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