Credit Score Factors

Learn about Credit score factors and how they affect your life and buying power if you need to finance a car, home or business opportunity.    

You may believe, as many Christians do, that you should never use credit and pay cash all the way.  However, if you have no credit whatsoever, you will never be able to finance a car if you have little or no money or purchased a home.  You will also miss out on business opportunities that will need to be funded by monies beyond your current financial ability.

If you learn how to take control over your money, you can use credit as a means of building your wealth, rather than building debt.

To prove this point, let's begin with how your credit score (FICO score) is calculated.  The process is long and each of the three major companies in the United States will participate in reporting credit scores and histories with a different method.

This is why your credit score is going to be a little bit different from one to the next.  There are some factors that you can take into consideration if you want to estimate your credit score on your own.

The Most Important Credit Score Factors

The first thing is if you have not ever owned a credit card or had any type of bill in your name or if you have borrowed money of any kind, your credit score is going to be zero.

Even though this is not considered to be bad credit, it is hard to even get a loan without credit as it is regarded the same as having bad credit.

There are some companies that may be willing to take a chance on someone with no credit but it is much better to build up your credit little by little as you go by having cards in your name and living a comfortable and stable life within your means of income.

Your credit history is going to make up about 35% of your total credit score and it is very important.  The bills you don't pay or debts you may have defaulted will hurt your credit score for 7 to 10 years before they are all erased.

You need to consider this and the fact that all of the bad choices you make today can hurt your credit in the future.  If you are repaying these debts now, chances are they will still show up on your credit report now as bills that were paid late.  There is 15% that is going to be the length of your credit history.

Then 30% of your score will depend on what you are currently owing to creditors.  Even if you are not late on paying your bills, if you have many loans out at one time, it may be possible that you are denied to have another.  Therefore it is important to only take out the loans you really need and it is imperative you repay them on time or early if you can.

If you pay off your loans early, you will not only see your credit score rise, you will also save money on paying interest.  This will show up on your credit history.  You will also want to try and keep your money in one place if possible.  10% of your credit score is going to be based on new accounts.  They will look at how many different types of loans you have applied for and how many you have open now.  When you are opening and closing accounts too fast is not going to help your score.

You need to use common sense.  Knowing what credit score factors are will help you increase your score or help you to find mistakes on your report.  This may help you and your credit score in the future.  You are able to see a free copy of your credit report annually for free so you should review this as well as get your credit score to be sure that you are being treated fairly.

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Credit Score Factors and all associated materials and related studies are the complete work of the site's author, Margaret Lukasik, and cannot be copied by any means without her express written permission.