Credit Scoring

Payment History 35% - I is important that you keep payments up to date on all accounts that you hold with your creditors. If you are late, go into collections, or worse charge off this can affect the credit score for up to 7 years. The older the negative information gets the less it affects the credit score. New lenders when approving new applications are most importantly looking at the recent two year activity.

Utilization 30% - It is important not to max out your credit limit, the higher the balance to credit limit ratio the harder it is going to be to apply for and get approved for new credit. The high balance could even affect your interest rate with that particular lender. New credit card laws limit other lenders from raising interest rates unless you are carrying a high balance with them.

Established History 15% - The longer you carry open accounts the better it looks on your credit report. You don't just want to carry an account 2 or 3 years then close out once you find a better deal with another lender. If you are leaving a creditor due to high interest rate. Keep the card, if you go elsewhere that lender might later send you an offer in the mail that you might regret loosing if you had just closed the account out. Be warned some lenders are going to start charging inactivity fees, so if you are not using the card to carry balances, periodically make a small charge every 3 months and pay it off immediately when the next statement is sent out.

New Credit & Inquiries 10% - Don't over shop for new credit, this can drag the score down, and get you dis-approved future credit when you apply elsewhere. New accounts are initially negative on the credit score, but over time it will improve and the score will rebound.

Mix of credit 10% - It is good to diversify the type of credit you are using. Like if you have 2 or 3 credit cards, and you have an auto loan, 1 or 2 installment loans, or a mortgage loan. There is also the utility accounts you pay like electric, and phone.

That scoring stats can be found at any of the Credit Reporting Agency sites:

www.experian.com
www.equifax.com
www.transunion.com

Consumers need to understand that scores differ from one access point to the next. What consumers see generated direct from the Credit Reporting Agencies are different then the scores generated at the lenders location. It is best if a consumer pulls their score to subtract 50 to 100 points to get an idea of the score a lender may access. So if the lender says they will approve a loan at 650 then the consumer wants there score to show over 750 range. There are different scoring models - consumers just get generic scores. Lenders differ between the industry they are from. There are Auto Loan scores, Mortgage Scores, Installment Loan scores, Personal Fiance scores, Credit Union scores, Utility scores, Insurance scores, Bankruptcy risk scores, and so forth.