Credit Score Information - 5 Factors The Bureaus Look At

Your credit score can force you to pay thousands of dollars or save you thousands of dollars a year. It is a three digit number that has a huge influence on your life.

The formula for calculating your credit score is a mathematical equation. This equation is not released to the public out of fear that people will use the information to make sure they have a good credit score.

You would assume the credit bureaus would want people to have a good credit score. However the credit bureaus customers are the lenders. It is in the lenders interest for the borrower to have damaged credit. This way they can charge higher interest rates and earn a bigger profit.

Here are the five factors that the credit bureaus look at when determining your score. Included is the approximate value each factor carries with the equation.

1. Payment History (40%)

This is very important. On your credit report it reflects your credit limit, credit balance, minimum payment and payments received.

If your credit card is constantly maxed out, then your score will be lower. However if you can make hefty payments on your balance this can help your score.

This is where negative marks are taken into account. You can remove negative marks by disputing the mark with the credit bureau or settling the debt.

I would recommend first disputing the negative item. Then if this is unsuccessful make a settlement agreement with the company that created the negative item. In this agreement you should have the company agree to remove the item from your report in exchange for payment. I recommend getting this agreement in writing.

2. Ratio of Credit to Debt (30%)

This means are all your credit cards at their credit limit? How much credit do you have that is not being used?

Your score can receive a bump if you can show the bureaus that you have available credit. The best method of doing this is by keeping your credit card balance around 10% of the limit. This will help because it shows the bureaus that you use your credit and that it is used responsibly.

3. Pursuit of New Credit Lines (10%)

How frequently is your credit checked? If it appears that your credit is being checked constantly then your score will be negatively impacted.

It is reflected in your credit report every time someone checks your report. So if you are buying a new car every six months or switching your phone plans it will not help.

Avoid having your credit run many times. There are people that are constantly trying to make purchases with their credit and for those there credit is lowered because of the credit constantly being checked.

4. Credit Experience (10%)

This is not really something you can control or should worry about. It reflects what type of purchases you have made.

This means what have you used your credit to buy. Do you have a mortgage, a car loan, credit cards, and etcetera? They say the more diverse it is the better, however it does not carry much weight in the equation.

5. Length of Credit (10%)

How long have you been using your credit? Did you just get your first credit card?
Do not worry about this factor. If you are new to the world of credit you can still have a great score.

In sum, only worry about the first two factors listed. However for your own knowledge the other three are looked at when your score is calculated.

If you take care of the first two factors then your score will be high. With a high score you can take advantage of rewards, automatic approval and save thousands with low interest rates.

To get a free sample dispute letter to remove negative marks or to learn about lexington law a professional credit repair service that we recommend visit us.