The 4 Key Factors of a Personal Credit Score

Improving Personal Credit
Credit Repair Services
Fix My Credit Score
Credit Bureau Scores
Disputing Credit Report Errors
FCRA Compliance
FDCPA Guidelines
Removing Negative Credit Items
Credit Improvement Strategies
Authorized User Benefits
Secured Credit Cards
Credit Building Loans
Credit Utilization Management
Late Payment Disputes
Financial Planning for Credit

Payment History (35% of the score):

This is the record of how you've paid your bills and is the most critical factor in your credit score. It shows whether you've paid past credit accounts on time. Late payments, bankruptcies, foreclosures, and other negative items can harm your credit score significantly.

Credit Utilization (30%)

This refers to the amount of credit you're using compared to your total available credit limit, also known as your credit utilization ratio. Generally, lower credit utilization rates are seen as indicators of good financial management and can positively affect your credit score. It is often recommended to keep the utilization below 30%.

Length of Credit History (15%)

This factor considers the age of your oldest credit account, your newest credit account, and the average age of all your accounts. A longer credit history can contribute to a higher credit score because it provides more data on your spending habits and repayment behavior.

Credit Mix and Types of Credit (10%):

This pertains to the diversity of your credit accounts, including credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans. Having a mix of different types of credit may positively affect your score, as it suggests you can handle various types of credit responsibly.

New Credit Inquiries (10%)

This includes the frequency and number of recent applications for new credit. Applying for several new credit lines in a short period can negatively impact your score, as it may suggest financial instability.

Different Scoring Models

Additional Information

FICO Score: The most widely used credit scoring model, developed by Fair Isaac Corporation. FICO scores range from 300 to 850 and take into account the factors mentioned above. FICO also has different versions tailored for specific credit types like FICO Auto Scores for car loans and FICO Bankcard Scores for credit cards.
VantageScore: Developed by the three major credit bureaus (Experian, Equifax, and TransUnion) as an alternative to the FICO score. While VantageScore uses similar factors as FICO, it calculates scores a bit differently, which can lead to variations in the scores.
Industry-Specific Scores: These are specialized FICO scores for certain types of lenders, such as auto lenders or credit card issuers. They are fine-tuned to predict the risk for specific credit types.

Impact of Scoring Models on Credit Scores

Each scoring model has its own algorithm and may weigh the information in your credit report differently. Therefore, the same person could have different scores across various models. For example, VantageScore places more emphasis on recent credit behavior and patterned data, which can be beneficial for people with a short credit history but may differ significantly from the FICO score.

It's also worth noting that not all lenders use the same scoring model or version. A mortgage lender may use a different FICO score model than a credit card issuer. This is why consumers may notice discrepancies between the scores a mortgage lender pulls and the one they see on consumer-facing credit score sites.

Understanding these factors and models can help individuals manage their credit more effectively and make informed decisions when applying for new credit.