Credit Scores and You

Credit Scores and You

Every ones knows they have a credit score. But few people know how it is made up. Below are the five areas that make up your credit score. The percentage give are just an approximation, not hard facts. You will find with credit, it is affected by how you manage your money, but it is very complicated.

*Payment history (35%)-Aside from extreme events, like bankruptcy or tax liens, late payments have the greatest negative impact on your score. Recency and frequency of late payments count too. In other words, even though a 60-day late payment is not as risky as a 90-day late payment in and of itself, a 60-day late payment made just a month ago will count more than a 90-day late payment from five years ago.

*Outstanding balances (30%)-Evaluation of your total balances in relation to your total available credit on revolving accounts is one of the most important factors in the FICO score. Owing a great deal of money on many accounts or "maxing out" on various credit cards can indicate that a person is overextended, and is more likely to make some payments late or not at all.

*Length of credit history (15%)-Your score takes into account how long your credit accounts have been established in general, how long specific credit accounts have been established, and how long it has been since you used certain accounts.

*New Credit (10%)-Research shows that opening several credit accounts in a short period of time does represent greater risk-especially for people who do not have a long-established credit history. Multiple requests will reduce your score because it looks like you are either trying to get a high amount of credit (possibly because of a cash flow problem) or that you are being rejected by lenders and having to apply elsewhere.

*Types of credit (10%)-The score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. Your score takes into account what kinds of credit accounts you have, and how many of each. The score also looks at the total number of accounts you have.


Jamie Woodend
Sales Representative
Remax a-b Realty Ltd Brokerage
88 Wellington Street
Stratford, Ontario, N5A 2L2
519-273-2821 ext 229 Office
519-949-0345 Cell