What are the factors used to calculate your credit score? Here are a few of the most important ones.
Credit History
Paying bills on time is generally the single most important contributor to a good credit score. Being late on any bill, for any length of time, is a possible indication of future non-payment of debt and is almost always viewed negatively by lenders. Having accounts that were sent to collection agencies is even worse, though nowhere near as bad as declaring bankruptcy. Paying your bills in a timely and consistent manner contributed to 35 percent of the score.
Outstanding Debt
Next most important was the amount of money you owe and the amount of available credit at your disposal. The assessment of outstanding debt fell into several categories, and included credit cards, car loans, mortgages, home equity lines, and so on. Also given consideration was the total amount of credit available. If a customer has 10 credit cards that each have $10,000 credit limits, that totals $100,000 of available credit. Generally speaking, people who have a lot of credit available tend to use it. This makes them a less attractive credit risk.
New Credit Applications
Careful study has shown that inquiries are an indicator of credit risk. Recent inquiries indicate a person may have outstanding accounts that are not yet part of the credit report. The more inquiries that appear on a borrower's credit file, the more likely a borrower may not be able to pay his or her bills as agreed....
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