Five Factors That Impact Your Credit Score

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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 Shashank@ArcusLending.com or call his office at (408) 615-0655 x 129.
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  1. [...] short sale will not drop the FICO score as much as a foreclosure. It is estimated a foreclosure will decrease a FICO score by as much as [...]

  2. [...] Will a good Rental Payment history improve your Credit Score? January 26, 2011 By Shashank Leave a Comment Very soon a good Rental Payment History will help you improve your credit score. Experian recently announced, it is now incorporating positive rental data from its RentBureau Division into the traditional credit file, opening a new avenue for the estimated 50 million underbanked consumers—which can include everyone from college students and recent graduates to immigrants—to build credit with continuous on-time rental payments. Brannan Johnston, vice president and managing director, Experian RentBureau said Given that one-third of the U.S. population rents, we felt it was imperative to reflect the true creditworthiness of those individuals who responsibly pay their rent.  Our research shows that over one in three consumers in the highest risk VantageScore score band will improve to at least the next score band with the addition of positive rental data from RentBureau. We are thrilled to be industry leaders in this initiative, and look forward to providing this credit-building avenue to residents. In the past, good rental payment history wasn’t factored into boosting a credit score. Positive rental history will now also help many renters who are looking for ways to rebuild their credit scores due to financial hardships such as a foreclosure or a bankruptcy. Hopefully, this would help them qualify sooner for new loans like auto, credit card and home. Also, the lenders now can capture a consumer’s rental payment obligations directly from the credit report and eliminate the need for time consuming verification of Rent. Additionally, lenders will now have a comprehensive understanding of a consumer’s total monthly obligations to assist with offering credit to emerging consumers. Experian acquired RentBureau’s multifamily division in June 2010. RentBureau is the largest and most widely used credit bureau for the multifamily industry. RentBureau’s database receives rental payment histories every 24 hours from its national network of property management companies, which currently includes more than eight million residents nationwide. Members of this network contribute their rental data to RentBureau directly and automatically from their property management software. In return, members receive immediate, centrally stored, integrated verification of new rental applicants’ payment history as part of their existing resident screening services. Once implemented, this rule will definitely help College Students, Recent Immigrants and renters looking to rebuild their credits. Also, I am hoping that the other 2 credit bureaus i.e. TransUnion and Equifax will implement something similar into their credit scoring models. You may also like to read – Five Factors that impact your Credit Score [...]

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