Credit Score Basics

Managing Credit & Building Credit > Credit Score Basics

What is in Your Credit Score?

When people refer to your "Credit Score," they could be referring to any one of numerous formulas, from any one of numerous agencies that provide any one of numerous numbers.

But when you go to apply for a loan, 90% of lenders use your Fair Issac Credit Organization (FICO) Credit Score.

The 3 major components to a credit score are: the Credit Reporting Bureaus, the Credit Reports and the FICO Credit Score.

What are Credit Reporting Bureaus?

A credit reporting bureau is a private business that banks and other lenders report your borrowing and payment habits to. The three major bureaus are Experian, Equifax and Transunion.

These companies also store information on you such as:

• Address history

• Job data

• Accounts currently active

• Closed accounts

The information saved by these credit bureaus is used to create a Credit Report. Because not all lenders report to all reporting bureaus, your file at each agency will have different information.

Your credit report is used to determine your credit score.

When you apply for credit, a lender will review your credit report and score to decide if you are a responsible borrower.

What Makes up Your Credit Score

There are five key factors that determine your credit score.

• 35% - Payment History

  • The history of how timely your payments on your credit accounts are

• 30% - Amounts Owed

  • How much credit you have outstanding and how much you are using

• 15% - Length of Credit History

  • How long you have had credit history

• 10% - Credit Mix

  • The different types of accounts you manage, such as: mortgages, credit cards, retail cards, ect.

• 10% - New Credit

  • How often you apply for new credit and acquire new accounts