A Quick & Easy Guide to Understanding Credit Scores

The highest credit score is 850, which allows for the best interest rates and lower monthly payments.

What makes up the credit score?

35% = Payment history
30% = Available credit on revolving accounts (capacity)
15% = Length of credit
10% = Accumulation of debt
10% = Mix of credit

What type of actions lower the credit score?

Late or missing payments
Using the entire amount of available credit on credit cards
Closing credit cards out (which decreases capacity)
Excessively applying for credit
Opening numerous accounts in a short period of time
Having more revolving loans in relation to installment loans

What does not affect the credit score?

Debt ratio
Income
Length of residence
Length of employment

Approximate credit weight for each year:

40% = Current to 12 months
30% = 13-24 months
20% = 25-36 months
10% = 37+ months

How to improve the credit score:

Lower credit card balances
Do not close credit cards (which decreases capacity)
Make payments on time
Do not open numerous new credit card accounts
Acquire a solid credit history with years of experience
Move revolving debt into installment debt