April 5th, 2013 1:03 PM by Dan Marchiando
1. Payment History or Habit - 35%The largest factor in a credit score is payment habit. Credit blemishes pull down scores based on four metrics: Recency, Size, Severity, and Number. Recent late payments, large late payments, very late payments, and lots of late payments do the most damage to credit scores. 2. Balances or Amounts Owed - 30%Large balances owed, lots of accounts with balances, and high utilization of credit affects 30% of a credit score. 3. Length of Credit History - 15%A longer credit history of on-time payments will increase scores. The average age of active accounts, and the age of the oldest and newest accounts are all factors, so resist the temptation to close your oldest accounts, or open un-needed new accounts. 4. Types of Credit Used - 10%While not a key factor, this category rewards borrowers who have a history of using a mix of different types of credit, like credit cards (called revolving), installment loans (like car loans), and mortgages. 5. New Credit - 10%Also not a key factor, this category considers the recency and number of new accounts and the recency and number of credit inquiries by credit granters like banks and mortgage companies. You can read more about this subject at MyFICO.com. Thanks for your interest.