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Posted by: Integrity Home Mortgage Corporation - David Couk on 10/26/2016

Factors That Determine Credit Scores

Factors That Determine Credit Scores

Know Which Factors Determine Your Credit Score



Creditors use a statistical formula to review the data in your files and compare it to credit performance of consumers with similar profiles. A credit scoring system awards points for each factor. The total of your points determines your credit score and gives lenders a prediction of how you may repay your loan. The following factors are used to determine your credit score:

  • Do you pay your bills on time? If you have paid late, had an account sent to a collection agency or have declared bankruptcy, this will have a negative impact on your credit score.
  • What is your outstanding debt? Many scoring models compare the amount of debt you have with your credit limits. If the amount you owe is close to your limit, it is likely to have a negative impact.
  • How long is your credit history? A short history can have a negative impact, but can be offset by on-time payments and low balances.
  • Have you applied for new credit recently? Applying for too many accounts within a short time period can negatively affect your score.
  • How many and what types of credit accounts do you have? Many scoring models consider the number and type of accounts you have. A mix of installment loans and credit cards may improve your score. Too many finance company accounts or too many credit cards will likely hurt your score