I attended an awesome class today hosted by Startex Title that helped me understand what factors influence your credit score. I want to thank Diane Rifai of Hometrust Mortgage for sharing this information and I hope it helps you.
As you can see Payment History only accounts for 35% of your FICO ® score. Payment History includes:
- Acct payment information on specific types of accounts
- Presence of adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.), collections items, and/or delinquency (past due items)
- Severity of delinquency (how long past due)
- Amount past due on delinquent accounts or collection items
- Time since (recency of) past due items (delinquency)
- Number of past due items
- Number of Accounts paid as agreed
Amounts Owed (30%)
Diane emphasized that you should not pay off everything each month and if you do, pay them before the statement comes out. So if the statement comes out on the 20th, pay it off on the 15th. Rationale: You charge $2,000 every month on a credit card with a $2,000 maximum limit but pay it off once you get the statement. The reporting bureau shows that the card continues to max out because it reports the amount owed. If however you paid the balance before the statement it would show a zero or small balance remaining on the card. She also emphasized that our balances should be at 30% of the total amount of credit available for credit card accounts. Example: (Card limit: $2,000; balance should be at $600 or less.)
- Amount owing on accounts
- Amount owing on specific types of accounts
- Lack of a specific type of balance, in some cases
- Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)
- Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)
Length of Credit History
- Time since accounts opened
- Time since accounts opened, by specific types of accounts
- Time since account activity
Every time you open new credit account, it counts 4-6 pts. Per creditor.
- Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account.
- Number of recent credit inquiries
- Time since recent account opening(s), by type of account
- Time since credit inquiry(s)
- Re-establishment of positive credit history following past payment problems.
Type of Credit Used
- Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)
Please note that:
- A FICO score takes into consideration all these categories of information, not just one or two. No one piece of information or factor alone will determine your score.
- The importance of any factor depends on the overall information in your credit report.
- Your FICO score only looks at information in your credit report
However, lenders look at many things when making a credit decision including your income, how long you have worked at your present job and the kind of credit your are requesting.
- Your score considers both positive and negative information in your credit report
Late payments will lower your score, but establishing or re-establishing a good track record of making payments on time will raise your FICO score.
Please don’t hesitate to call me if you have any questions regarding this blog.