What Goes into My Credit Score?

For many, deciphering what your credit score means and how to improve your score or what is calculated to create your credit score is a murky, difficult-to-understand process. This can make applying for loans, credit cards, or even apartmental rentals a more stressful process. Without a good credit score, your applications and attempts to build credit can be denied by a financial institution. However, knowing the details about what goes into a credit score can help you make better decisions.

Essentially, a credit score is used to determine your creditworthiness, and is a risk assessment figure used by 90% of financial institutions in the United States. The credit score predicts risk of you falling behind on payments, which is one factor that may cause your credit score to fall in the long term. FICO is the almost universally recognized credit score model, and your FICO credit score can range from 300 to 850. The higher your credit score number, the lower your risk to banks and financial institutions.

There are five factors that go into a credit score: payment history, amounts owed, length of credit history, types of credit used, and new credit. Your payment history accounts for 35% of your score, so this is where missing payments can be detrimental. The amounts owed comprises 30% of the score, which is how much you owe on your accounts. Length of credit history, or how long you’ve had an account opened and the amount of time since you’ve used the account, is 15% of the score. Types of credit used and new credit, which include the number of recently opened accounts or credit inquiries, both make up 10% of a credit score.

To boost your credit score, experts recommend you carefully watch your balances and payments. Keeping a low balance is key, as well as maintaining a low balance. It is also recommended that you make purchases that comprise about 30% or less than the total amount of revolving credit you have. For example, if you max amount of revolving credit you have is $1000, then using around $300 or less on that card each month and paying the balance off each and every month is the recommended way to show responsible use of credit to financial institutions.

Cain & Daniels, Inc.

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Cain & Daniels, Inc. specializes in the settlements of commercial business debts such as lawsuits, judgments and past dues. Located in Tampa, Florida.

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