Your credit score can make a big difference in your life, but have you ever wondered exactly how that specific number is determined.
Knowing how a credit rating is measured is one of the first steps to improving your score. Let’s take a look at how FICO uses specific categories to determine your number.
How Is Your Credit Score Measured?
Payment History: 35% The biggest single factor determining your credit score is your payment history. Lenders like to know that you’ve been reliable in the past, so the more you make consistent, timely payments, the more you’ll see a rise in your score.
Amount Owed: 30% Owing a large amount on your credit accounts won’t automatically create a high-risk situation, but you don’t want to get too close to topping out your available amount. If the majority of someone’s available credit is used, it could mean they are over-extended, possibly leading to late or missed payments.
Length of Credit History: 15% For the most part, the longer a person’s credit history, the less likely they are to default on loans. FICO looks at factors like how long your accounts have been established and how long it’s been since you last used them.
Types of Credit Used: 10% This category looks at your mix of credit types, including credit cards, store accounts, mortgages, and other loans. It’s not necessary to have one of everything, and you should never open accounts you don’t intend to use, but having a good credit mix shows you are responsible and organized.
New Credit: 10% Research has shown that opening many lines of credit over a short period of time can create a significant risk for default. It’s okay, and even recommended, to check your credit on a regular basis, but people who open many accounts at once could see a drop in their score.
KBB in the News August new-car sales drop 2 percent from last year for estimated 17.3 million SAAR, according to...
Information You Need Before You Buy
After years of delays, the credit industry finally agreed to give consumers access to their personal "credit scores." This is important, because lenders use credit scores to determine who to give credit to and at what rates. Knowing your credit score can be empowering,If it's low you can take steps to improve your credit worthiness and if it's high you may be able to use it as leverage when shopping for your next car loan.
Auto Credit Financial & Auto Credit Dealer Marketing Services and all of its logos contained within our corporate structure are registered trademarks. The contents of all material found on this website and all associated web pages,links and publications may not be reproduced,disseminated or downloaded and or transferred in any form or by any means except, with the written and approved agreement from: