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What determines your credit score?

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Over time I have received numerous questions regarding the current credit scoring system. The predominant question seems to be; what goes into determining my credit score? I thought I would give you a quick overview of what is factored into the scoring process.

The 5 major categories that go into a given credit score are:

  • Approximately 35% of your score is based on your payment history
  • Approximately 30% is based on how much you owe in relationship to your credit limits. This does not necessarily mean that because you may have a high balance on your accounts that your score decreases, if you have the history of managing that level of debt well.
  • Approximately 15% of the score is based on the length of your credit history.
  • 10% of your total score is based on the amount of new credit that you take out and inquiries on your credit report.
  • A common concern is multiple credit inquires. If, for example, you are shopping for a car and there are multiple credit inquiries over a short period of time; this may not necessarily affect your score as FICO takes this “shopping” into account.
  • And finally, 10% of your score is based on your mix of accounts; installment loans, credit cards, mortgage loans, etc. and how well you manage them.

Please keep in mind that this is just an overview of how the FICO system is modeled. There are other things within the model that can affect a credit score. I have a pdf file that goes into greater detail. Contact me at patbarney.com and I will be happy to forward it to you or give me a call at 952-835-9327 and I’ll drop it in the mail.

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