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