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Jul202011

Credit Score Factors

Wednesday, July 20, 2011 at 5:56PM

With every economic announcement and week that passes in financial markets it seems that there is slow but constant rise in consumer sentiments. This is great because it hopefully means that people are spending more money which is keeping local economies moving forward. What that also means is that consumers not only have taken time to get their debt levels under control but might be looking into expanding credit limits or increasing the amounts of borrowing. The economy as a whole has spent the last few years in a credit tightening phase as the credibility of borrowers weakened - but all that is starting to change. I know that friends and colleagues are starting to report the arrival of unsolicited credit card offers so that’s a positive sign. If you are still working on your credit health or are thinking about how you might be able to keep your credit healthy I wanted to list the biggest factors that go into keeping your credit healthy. Oh and for the record this applies to all your small businesses and entrepreneurial ventures as well.

1. Payment History = 35% of your score. Here are some of the things that go into this part of your credit score. As with anything the quality of the credit you use is important but it’s also about how you honor those obligations.

The actual payment details on the types of credit you have out.
What do your public records look like: any bankruptcy, judgements, liens, suites, wage attachments etc
How severe your delinquency or past due on collection items
How far is the time between your credit troubles: payments, delinquencies, collections
Number of past due items and even of accounts paid as agreed/settled

2. Amounts Owed = 30% of your score.

How much do you owe on each of your credit accounts and what kind of accounts those are
Balances you keep or lack of balances on accounts and number of accounts
The proportion of credit lines used and installment loans still owing

3. Length of credit history = 15% of your score. This one is kind of easy to explain and understand.

It’s the time since since accounts have been opened and the kind of accounts are opened
The next is the time since each account’s activity.

4. New credit = 10% of your score.

How many new accounts have recently been open and the types of accounts
Number of recent credit card inquiries
Times between credit inquiries and new account openings.

5. Last but not least: Types of credit used = 10% of your score

Literally the make up of your credit profile: types of accounts/credit products
How many and frequency of use for each

That about wraps up what goes into a credit (FICO) score and there is a ton of new legislation coming out as this month comes to end. I definitely recommend you reaching out to real credit pros like Cambridge Credit Counseling (it’s kind of all over their home page!) to get a handle on how these new laws and rules might benefit you and your business score’s health.

Hope you also enjoy this video from Your Money 2.0 with some credit tips for seniors.

Nunzio Bruno |

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