Tuesday, December 20, 2016

How are Credit Scores determined?


How do Credit Bureaus determine my credit score?
35% - Payment History
30% - Debt Ratio
15% - Length of Credit History
10% - Types of Credit
10% - Number of Credit Inquiries
The percentages in this chart show how important each of the categories is in determining your Credit score. We will help you to remove negative items from your payment history. We will also show you how to maximize your debt ratio score, even if paying off credit cards is not an option.

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What type of information do credit bureaus collect and sell?
Credit bureaus collect and sell four basic types of information:
  1. Identification and employment information
    Your name, birth date, Social Security number, employer, and spouse’s name are routinely recorded in your credit report. They may also provide information about your employment history, home ownership, income, and previous address if a creditor requests this type of information.
  2. Public record information
    Events that are a matter of public record, such as bankruptcies, foreclosures, or tax liens, may appear in your report.
  3. Inquiries
    CRAs must maintain a record of all creditors who have asked for your credit history within the past year. It is generally beneficial to keep the number of inquiries as low as possible.
  4. Payment history
    Your accounts with different creditors are listed, along with the balances, high balances, and outstanding balances. Related events, such as referral of an overdue account to a collection agency, charge off accounts or other delinquencies may also be noted.
How does a credit bureau determine my score?
Credit scoring models are complex and often vary among creditors and for different types of credit. If one-factor changes, your score may change — but improvement generally depends on how that factor relates to other factors considered by the model.
Scoring models generally evaluate the following types of information in your credit report:
  • Do you pay your bills on time? Payment history is a major factor in credit scoring. If you have paid bills late, have collections, or declared bankruptcy, these events will not reflect well in your credit score. 
  • Do you have a long credit history? Generally speaking, the longer your history of holding accounts is, the more trusted you will be as a borrower. 
  • Have you applied for credit recently? If you have many recent inquiries this can be construed as being negative by the credit reporting agencies. Only apply for credit when you really want it. 
  • What is your outstanding debt? It is important that you are not using all of your available credit. If all of your credit cards are maxed out, your scores will reflect that you are not managing your debt wisely. 

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