What Does Your Credit Score Really Say About You?

How Does My Credit Score Affect Me?

Your credit score is a complex figure that evaluates your financial reliability or credit risk. In the United States, your credit score is paramount and can influence many of the events in your life. Lenders will use this number to determine how likely you are to repay a loan and make loan payments on time. Typically your interest rate on a loan is based on what bracket your score falls into. In addition to financial institutions, potential employers, landlords and other entities are utilizing your credit score to determine how responsible you are. Therefore, it is something that you should take care of and monitor regularly. If not, getting a mortgage, automobile, job, and many other essentials can be difficult to do.

A credit score is a three-digit number that ranges between 300-850. Generally, individuals with a credit score of 700 or above are considered good. A score of 800 or above is deemed excellent. The average person's credit falls between 600-750.

So How Is My Score Calculated?

The most widely used score comes from a company called the Fair Isaac Corporation also known as FICO. The below factors are taken into account to determine your FICO score:

Payment History
This is the largest influencer of your credit score. Making up 35% of your score. This includes your account payment information, bankruptcy or judgment, how long overdue payments are, amount past due, and the time since any adverse occurrences.
Debt Usage
This is the second largest influencer on your credit score making up 30% of your score. This includes amounts owed on accounts individually and totaled together as a whole, the number of accounts with balances, the proportion of credit line used and proportion of installment loan amount still owed. The general rule is to keep the amount of debt you owe on your credit cards below at least 30%, ideally 10% of your available credit line.
Credit History
How long you have managed credit is something you have very little control over and makes up 15% of your score. This includes the time since your accounts have been open as well as the time since your accounts have been active.
New Credit
The number of credit inquiries appearing on your history makes up 10% of your score. This includes inquiries when shopping for new credit, number of and time since recently opened accounts, number of and time since recent credit inquiries, and the re-establishment of positive credit history following past issues.
Types of Credit
The different types of accounts appearing on your credit history accounts for 10% of your credit score. This includes the number of various types of accounts like credit cards, retail accounts, installment loans, mortgages etc.