One question often on everyone undergoing credit repair’s mind is how exactly they’re supposed to fix their bad credit when they don’t even know what goes into their credit score? Your credit score is a pretty shy customer, only really showing itself when certain people ask for it and never really revealing what goes into it. This can make any serious attempt at credit restoration seem almost impossible.
So how do you go about credit repair when you don’t know what makes up your score?
For this article, we’ll take a look at the FICO score model, the most widely-used credit scoring model in the business. Other scores may differ slightly, but they all follow the same basic principals the FICO score does. With that said:
Here’s exactly what makes up your credit score
Payment history.
Covering every account on your credit history, your payment history also factors in all the negative items on your report, such as judgments, bankruptcies, collections, and late accounts – and how many there are on file. If you’re working to improve your credit score, you’ll want to pay extra close attention to this.
Amounts owed.
This takes a look at how much you owe on each of your active accounts. It also factors in the proportion of revolving credit lines used and the number of installment loans still owed. Basically, the more money you owe across multiple accounts, the lower your credit score could be, especially if more than one of those accounts is maxed out.
Length of credit history.
Going back to when you opened your first credit account, this looks at the age of your individual accounts; the older, the better. If you plan on closing any credit accounts to help improve your credit score, consider keeping your older accounts away from the chopping block.
New credit.
New lines of credit are factored by the number and proportion of recently opened accounts to your existing ones. It also looks at the number of recent credit inquiries, and factors in the re-establishment of positive credit.
Types of credit used.
This looks at the number and type of accounts (revolving cards, installment loans, mortgages, etc.) on your credit report. Variety is the spice of life (and the key to a higher score), so if you have more than just one of these types of accounts on your report, it’ll help fill out your credit history.
About the Author
Victor Sullivan is a man on a mission: to rid the online world of bad financial information and tips. Progress has been slow. If you’re in need of help repairing your credit, and don’t know where to look to find some good deals, check out these credit repair reviews, including an exclusive My Credit Group review.