The Greenville Financial Empowerment Center explains the factors that can affect your score.
By: Bradley Robinson, Contributing Writer
brobinson@greenvillecounty.org
Information in your credit reports helps determine your credit scores. The three major credit bureaus—Equifax, Experian and TransUnion—collect information from lenders, but each lender sets its own reporting schedule. Because of that, updates to your credit reports may not happen at the same time.
You may also have more than one credit score. Companies such as FICO and VantageScore use different scoring models, and the scores can vary depending on the model and the information in your credit report.
Although scoring models differ, they generally consider several common factors:
Payment history: This shows whether you have paid your bills on time. Late or missed payments and accounts sent to collections can hurt your score. Paying at least the minimum amount due by the due date can help you avoid late-payment marks.
Amounts owed: This includes how much debt you have and how much of your available revolving credit you are using. That percentage is called credit utilization. Keeping balances low compared with your credit limits can help. Thirty percent is often mentioned as a guideline, but it is not a universal cutoff; the effect on your score varies.
Credit history: Scoring models may consider how long you have had credit accounts. A longer history can help. Closing an account does not necessarily erase its history from your credit report, though closing a credit card can affect the amount of credit available to you.
Credit mix: Models may consider the types of credit you use, such as revolving credit cards and installment loans. This factor is only one part of a score, and you do not need to take on new debt just to change your credit mix.
New credit applications: Applying for a loan or credit card can lead to a hard inquiry, which may affect your score. A soft inquiry, such as checking your own credit, does not affect your score.
You can use the FICO Score Estimator to get an estimate based on information about your credit history and the factors described above. It can also help explain how credit scores are calculated.
FICO Score Estimator: myFICO.com/fico-credit-score-estimator
