Your Credit Score Consists of a lot more than the Bureaus Say It Does!

MyFICO and the Credit Bureaus state that your credit score consists of the following:

35% = Payment History
30% = Amounts Owed
15% = Length of Credit History
10% = Types of Credit Used
10% = New Credit

So they say. This is a half-truth, and the other half is what can destroy your credit score.

35% = Payment History
Negative or derogatory information has a much greater impact on your credit score than positive information. Recent late payments are much worse than even bankruptcies that are a few years old.

30% = Amounts Owed
Again, another Half-Truth. If you have $2 million in debt it will not impact your credit score if you have $20 million in credit. In this case you’ve only borrowed 10% of your credit limit. That is good! In fact, you should ALWAYS only charge around 30% of your credit limit on a credit card. What is bad for your credit? If you have a credit card with a $1,000 credit limit and have spent $900 (90%) of that limit that’s very bad.

Let’s look at another unknown fact about the rest of your “35% of your credit score” including “Length of Credit History, Types of Credit Used and New Credit.”

The companies you associate yourself make significant difference on your credit score. If you have an account with companies like Capital One and Providian…those that you see advertised or that have low teaser rates, your score will go down!

Why?

The Bureaus know that people with these cards are more risky than people with accounts from more reputable institutions.

For more information about the errors in your credit score and to learn how much they are costing you, please chat with us or give us a call today.

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