Five Factors That Impact Your Credit Score

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On March 29, 2009
Last modified:September 25, 2013



Factors That Impact Credit Score













What are the factors that impact your credit score?

1. Payment History – 35% Impact
Paying debt on time and in full has the greatest positive impact on your credit score. Late payments, judgments and charge-offs all have a negative impact. Missing a high payment will have a more severe impact than missing a low payment, and delinquencies that have occurred in the last two years carry more weight than older items.

2. Outstanding Credit Balances – 30% Impact
This factor marks the ratio between the outstanding balance and available credit. Ideally, you should make an effort to keep balances as close to zero as possible, and definitely below 30% of the available credit limit when trying to purchase a home.

3. Credit History – 15% Impact
This portion of the credit score indicates the length of time since a particular credit line was established. A seasoned borrower will always be stronger in this area.

4. Type of Credit – 10% Impact
A mix of auto loans, credit cards and mortgages is more positive than a concentration of debt from credit cards only.

5. Inquiries – 10% Impact
This percentage of the credit score quantifies the number of inquiries made on a consumer’s credit within a six-month period. Each “hard inquiry” can cost from two to 25 points on a credit score, but the maximum number of inquiries that will reduce the score is ten. In other words, 11 or more inquiries within a six-month period will have no further impact on the borrower’s credit score. Note that if you run a credit report on yourself, it will have no effect on your score.

You may also like to read – How to build a good credit from scratch

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Shashank Shekhar

Best-selling author, Shashank is a mortgage lender with Arcus Lending, offering mortgage loans for home purchase and refinance in California. Shashank has been featured as a mortgage expert on Yahoo! News, ABC News, CBS, NBC and FOX. For a free consultation and/or rate quote email him at or call his office at (408) 615-0655 x 129.
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