Have you ever wondered how your credit score is calculated? What magic combo of numbers inform the total? For most people, it is a profound mystery and yet the score associated with your name impacts your ability to secure a credit card or loan, finance your home, rent an apartment, buy a car or even get a job. In a nutshell, it can shape the course of your life so we will try to demystify it for you.<\/p>\n\n\n\n
Each credit bureau uses a different combination of scoring algorithms to calculate scores so they may vary slightly but they do all consider the following factors:<\/p>\n\n\n\n
The Bureau examines your comprehensive credit history including credit cards, lines of credit, retail department store accounts\/credit cards, installment loans, car loans, student loans, finance company accounts, home equity loans and mortgage loans for primary, secondary, vacation and investment properties. They report on the number and type of credit accounts that you\u2019ve paid on time, late or missed payments and how recently and how often they were missed, how much was owed etc. They will also look at how many are delinquent vs. those that are in good standing. For example, if you have 6 credit accounts or \u201ctradelines\u201d in industry-speak, and 3 have had late payments, that ratio may impact your score. Needless to say, they go through your credit history with a fine-toothed comb.<\/p>\n\n\n\n
Another key piece of your credit score is the total available credit being used on your credit cards and lines of credit. The bureaus also look at the total value of the line of credit or credit limit \u2013 the maximum amount you could borrow or charge against the account.<\/p>\n\n\n\n
This section of your credit file details how long your credit accounts have been in existence. In general, creditors like to see that you\u2019ve been able to properly handle credit accounts over a period of time.<\/p>\n\n\n\n