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Home > Credit Score > Blog > What makes up your Credit Score? Credit score and free credit scores

What makes up your Credit Score?

Tuesday Jun 23, 2009

Credit we go again. I woke up this morning in cold sweats knowing that today I needed to write about credit scores....again. What a sad sad life I lead as a blogger. I keep having to remind myself that this is important stuff and actually matters in life. So you remind yourself of that too, as your eyes begin to feel heavy and slowly close as you are reading this.... I can assure you that I only fell asleep 3 times while writing this, and I have the hard job, so you should be fine.

Once again, we learned all about free credit scores last time around. This time I figured I would delve a little deeper into the topic and figure out what makes up a credit score. Wake up! I'd like to break down for you how a credit score number is decided. Like everything I blog about, there is a detailed process that goes on behind the scenes that only the smartest of smart people understand. Unfortunately, as I'm sure you have already have picked up on, I am not in that category. And if you are reading this for some odd reason, you aren't either.

Credit scores are calculated from data that can be found in your credit report. All of this data that makes up your credit score can be separated into five distinct categories. This is so us normal folk can understand.... Each of the five categories are given a percentage number. This percentage reflects how important that specific category is on your credit score. Wake Up!

The five categories are as follows: 1. Payment history, 2. Amounts owed, 3. Length of credit history, 4. New credit, 5. Types of credit used. That is pretty straight forward, so I hope no one is lost. Hold on to your hats, because this is when it gets tricky. Payment history makes up 35% of your credit score, amounts owed make up 30%, length of credit history is 15%, new credit is 10%, and types of credit used makes up the last 10% of your credit score. For all you non-math majors out there....add all of those numbers up (not using a calculator) and you get 100%.

Payment history is pretty much how you have handled your payments in the past. How you have handled credit cards, do you have delinquent accounts, do you have past due items, and how many accounts have you paid on time? Amount owed is straight forward, the amount of money owed on accounts and how many accounts have balances. Length of credit history can be defined as how long accounts have been open. And, new credit is the number of recently opened accounts. This is the last time I will say it, Wake Up!!!! Finally, the types of credit used is understood as the various types of accounts, such as credit cards, installment loans, retail accounts etc.

Class dismissed!

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