What’s Included in My Credit Score?
In most cases, the credit score you order (again, for a fee) will be your FICO score, named for the company that developed it in 1989. Each of the credit bureaus may include different information in their calculations, so your FICO score can vary depending on which credit bureau provides the score. While the exact formula used to determine a FICO score is protected, FICO discloses some of the basic categories that affect a person’s score. For instance:
- Payment history. Late payments on bills, such as a mortgage, credit card or car loan, will cause a FICO score to drop, while bills paid on time will improve a score. This category accounts for 35 percent of a score.
- Amounts owed. If you owe a high percentage of your available credit on a credit card, for instance, you may appear to be overextended and at risk of late payment or nonpayment. If you have a history of small balances and not missing payments, that will improve your score. This category accounts for 30 percent of a FICO score.
- Length of credit history. Accounting for 15 percent of your score, this category looks at how long your credit accounts have been established and how long it has been since you used specific accounts.
- Types of credit used. This part of your score, worth 10 percent, looks at your mix of installment, revolving, consumer finance and mortgage loans. You can benefit by having a history of handling different types of credit.
- New credit. The final 10 percent of your score considers how many new credit accounts you have opened in a short period of time. Hard credit inquiries, which occur when you apply for a credit card or loan, can hurt your score, especially if several occur within a short time frame.
The percentages attached to each category can help consumers determine which areas are most important to their score. According to Jeff Taylor, managing partner of Digital Risk, Inc., the most important items in your report are delinquencies and charge-offs, your percentage of revolving credit that is open (e.g. how much debt you owe versus how much credit you have available), and recent credit inquiries. “Delinquencies, especially with the last 12 months, are devastating,” Taylor says. “After that, the percent of revolving credit, then inquiries.”
What Should I Do If Something Is Wrong on My Credit Report?
If you think you see an error on your report, call the consumer credit bureau that provided the report and state your case. “If there is a material error, the bureau is required to post a fix within 30 days, or the line of credit has to be suppressed until the error is made right,” Taylor says.
And, of course, if your score is not where you want it to be, make sure to get and stay current on your bills and make a plan to pay off that revolving debt. (Here’s a good place to start.)