Here is a breakdown of the approximate weighing factors of each part of your credit report.
35% - Your Payment History 30% - Amounts You Owe 15% - Length of Your Credit History 10% - Types of Credit Used 10% - New Credit
Payment history is the heaviest weighed factor. They look at the number of accounts that have been paid as agreed. Next they look at the delinquent accounts. Length of past-due status, total number of past due items, how long its been since you have had a past due payment. Finally what negative public records or collections have been reported?
Amount you currently owe is the next to be considered. The software looks at the types of accounts you currently carry and the balances owed on them. How many of your revolving credit lines are you currently using and how many of them are maxed out. How much you owe on installment accounts compared to their original values. The software looks to see if you are getting these accounts paid down. How many accounts have zero balances and when was the last time they were used.
Length of credit history is the next category. Looking at your history they will take into account the following. How long has your credit been tracked and how long have your accounts been open? How much time has passed since the last activity on your report? Finally the length of good credit history will improve your score.
How do you use your credit? The score for credit use is weighed by the number of accounts you have and what type of accounts they are. It compares the number of revolving credit, installment loans, mortgage(s) or other types. If you have a mixture of account types instead of mostly revolving accounts then that will help your score.
How much new credit is being reported? How many accounts have you recently opened and what is the total of new accounts? How many recent credit inquiries have been posted to your report? How much time has passed between credit inquiries and new accounts opened? Have you reversed negative credit history? Last thing the look for is if you are creating a bunch of new accounts.
So what is a good credit score? Credit scores run normally between 350 and 830. The higher your score the less of a risk you appear to be to a lender. You will also notice that the higher your credit score the better interest rates you will be offered. With today's speed of information many loans are approved directly from your credit score. Below you will see a break down of credit scores for the US population. Credit scores over 750 are most generally considered a high score and receive better rates or terms.
Up to 499: 1% 500 - 549: 5% 550 - 599: 7% 600 - 649: 11% 650 - 699: 16% 700 - 749: 20% 750 - 799: 29% Over 800: 11%
There are multiple credit reporting agencies and its important to know that if you are applying for a mortgage many lenders will pull from multiple sources. So if you get a copy of your credit report it may look a little different from one agency to the other.