Figuring Out the Ever Nebulous Numbers Called Credit Scores

Credit Score Factors

The information contained on our credit reports affect every aspect of our lives; including employment, insurance, and even interest rates (mortgage, credit cards, automobiles, etc.). There is specific information captured on our report which is used to form our credit score:

? Payment History (accounts for approximately 35%)

? Outstanding Debt (accounts for approximately 30%)

? Length of Credit History (accounts for approximately 15%)

? Types of Credit Currently in Use (accounts for approximately 10%)

? Recent Inquiries (accounts for approximately 10%)

Payment History ? Your payment history includes the following types of specific Information:

? Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.)

? Adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items)

? Severity of delinquency. The more recent the problem, the larger the impact on your credit score.

? Amount past due on delinquent accounts or collection items

? Time since and frequency of past due items (delinquency), adverse public records, or collection items

? Number of past due items on file

? Number of accounts paid as agreed

Outstanding Debt ? Your credit score is adversely affected if you owe amounts at or near your credit limit, so if possible, split the balance and transfer some of the debt to a second card. A low balance on two cards is better than a high balance on one. (Credit card companies usually charge a 'transfer' fee, but 'reward' you for switching you debt by offering a low interest rate. Sometimes the interest rate offered is for an introductory period only, so make sure you read the fine print before transferring your debts.)

? Amount owing on accounts

? Amount owing on specific types of accounts

? Lack of a specific type of balance, in some cases number of accounts with balances

? 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 ? The longer you have maintained your accounts, the better it reflects on your credit report.

? Time since accounts opened

? Time since accounts opened, by specific type of account

? Time since account activity

Types of Credit in Use ? Loans from finance companies generally lower your credit score. According to FICO, this is heavily relied upon when there is little other credit history upon which to base a score.

? Number (or amount) of different types of accounts (i.e. installment loans, credit cards, retail accounts, mortgage, consumer finance accounts, etc.)

Recent Inquiries on Your Report ? Recent applications for several new accounts may negatively affect your score. If you inquire about special promotions it does not affect your credit report.

Now that we know what factors the credit bureaus consider when calculating your credit scores, you might be saying to yourself... yeah, yeah, I've heard all that before. Tell me something I don't already know, like how I can raise my score!

With that thought in mind, pay your bills on time. If you have recent late payments on your credit report, lenders view this as you larger credit risk. When you get your bills, don't let this sit on your kitchen table collecting dust. Keep a log of your current bills by due date and the total amount due. Having a late payment appear on your credit report today can have a larger impact on your credit score than filing bankruptcy five years ago!

Manage your credit effective, and don't say... "Duh, that one is obvious". I am definitely stating the obvious here. However, one of the most common ways for consumers to get into a downward spiral credit wise is the poor choices we all have made using the unsecured portion of our credit; CREDIT CARDS. Credit cards do offer immediate relief (or often time's instant gratification) to our needs (or wants). Don't go out buying luxury items if you don't have cash readily available to pay for those items when the bill comes due. That means saying "NO" to plasma screen TV's, new furniture, Gucci watches, and all the items that we "simply can't live without".

Anytime you run a balance on an unsecured credit card or line of credit, it has an impact upon your credit score. By focusing on keeping the balance you carry on your credit cards / lines of credit to less than 25% of your total line of credit, you will be in better shape regarding your credit score.

For more information regarding your credit scores, credit reports or debt options currently available to you, please contact Gateway Credit Connection or visit us online at

Michael Goff is the Co-Founder of Gateway Credit Connection, helping empower consumers to take control of their personal and business finances.

Gateway Credit Connection 15770 Dallas Parkway Suite 1100 Dallas, TX 75248 469.547.4323 Visit us online at