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Three Bureau Credit Report
Experian
Three Bureau Credit Report
Equifax
TransUnion Credit Bureau
TransUnion

Factors that Affect the Credit Score

There are five primary factors that will influence the scoring of a personís credit. Each of these carries a different weight according to the reason that someone is checking the credit. However, all of them have an importance in the final score.

Payment History

How a person has paid their bills is of primary importance in choosing to extend credit to them. If they have been on time and never missed a payment, they will probably be a safe risk for lending money to them.

For those who have missed a payment or been late, the company will look at how long it has been and if there have been multiple late payments or just one. A payment that was missed but made up later will not be as bad of a mark as one that went to collections.

Credit Balance

Companies also look at how much a person currently owes on their credit balances. Someone who maxes out their credit is a higher risk than someone who keeps their balance significantly lower. This factor takes into account all type of credit, not just credit cards.

Length of Credit

How long a person has had credit also carries weight in the credit score. A person who has had an account open for a long time will rate higher than people who have a newly opened account. Closing an account that isnít used will actually lower the score for a period of time.

Application for Credit

If a person has applied for credit recently, it can indicate a need for money. If there are multiple requests for credit, it can be a warning sign. Lenders will take into account more than one inquiry in a short time frame for the same type of credit. For instance, a person may have more than one credit request for a home or auto loan as they look for the best rates.

Type of Credit in Use

Lenders and other companies also look at the types of credit a person is using. There are two types: revolving and installment credit. Revolving credit includes department store credit, credit cards and other companies that allow you to have credit even after you pay the balance. Installment credit includes mortgages and auto loans. With this type of credit, once it is paid, there is no more credit unless the person applies again. The best credit risk is seen as the person who uses both types of credit.

  1. The Truth About Credit Scores
  2. Factors that Affect the Credit Score
  3. How a Credit Score is Calculated
  4. The Three Credit Agencies
  5. What is the FICO Score?
  6. Laws That Affect the Credit Score
  7. What Companies and Institutions Look For
  8. How to Improve Your Credit Score

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