Credit Score – The Main Components

A number of components go into the calculation of your credit score. The algorithm is quite complex and one that most people do not understand and do not need to. However, we have a number of factors listed, and if you happen to be ambitious about achieving a perfect credit score of 850, you can try and adjust or manage your spending in those factors which will maximize your potential for scores. Of course, this is something that is easier said than done, as most people have realized.

Payment History – 35 % . . .

The payments you make (or dont) to people on a timely basis forms your payment history. The payments on the loans taken out by you are checked for payment history. If you want to make your payment history score better, there is no way other than begin clearing your debts, on time, every time.

Amounts Owed – 30 % . . .

Of course it is important that you do not leave the leverage from your borrowing capacity unused, but it is essential that you never have more money owed as debt than what is your capacity for borrowing. Less than fifty per cent of your borrowing capacity should be used.

Duration of Credit History – 15 % . . .

Another important element of the credit score is the length of time you have held debt for. Many people do not have a credit card score of 850 as they have not had credit long enough.

New Credit – 10 % . . .

An occasional new credit card here and there is good for the overall credit score. However, make sure that you are not buying up credit cards like crazy. This does not make as good an impression on the lenders.

Types of Credit Used – 10% . . .

Having a good variety of credit, everything from lines of credit, car loans, mortgage, reflects good for your credit score.