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You and Your Money

PERSONAL FINANCE:  What Portion of a Credit Score is Payment History?

In the United States, credit scores are broken down into five categories. Each category represents a fixed percentage of your credit score.

35% Payment History
Late payments on bills reported by a lender. These debts usually include your mortgage, auto loan, credit cards, etc. Not all lenders report to credit bureaus.

30% Debt-to-Credit Limit Ratio
The ratio of current revolving debt balances (e.g., credit cards) to the total credit amount remaining (credit limit). Even if you pay your credit card on time and make larger than minimum payments, keeping your limit near the maximum will lower your FICO score
.
15% Length of Credit History

All closed and open-ended accounts have an age history (how long they’ve been open). The longer a creditor has allowed credit to be extended has a positive impact on a FICO score.

10% Types of Credit Accounts
FICO scores take into consideration the type of credit load that a borrower maintains (revolving, installment, consumer finance). If a borrower’s entire credit report shows nothing but credit cards, a lender’s might shy away from providing a mortgage or auto loan.

10% Hard Inquires
Multiple credit inquires over a short period of time seeking to open new credit (credit cards, signature loans, etc.) can adversely affect an individual’s score for a long period of time. However, mortgage and auto loan inquires over a short period of time will most likely not result in a marked decrease in your FICO score.

Note that employment history and residence (rent or own) are not part of your FICO score. But, a lender can deny credit based on length of time on the job or the amount of jobs in a given period. Some creditors use your residence status in determining your credit worthiness.

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