Your credit score can mean the difference between getting approved for a loan or not. Your score also has an impact on things like your loan interest rate, terms of that loan, and even more.
Although many different factors go into determining your overall credit score, there are five general categories that are used to calculate all the data. Here is a quick recap of what those categories are.
Payment History – 35%
This is the most heavily weighted category, comprising thirty five percent of your total score. Have you been paying your credit bills on time? If so, then you will have a much better rank in this category, which will boost your total score.
Amount of Debt Owed – 30%
This category factors in all the debt you currently own. This includes different types of debt accounts, the number of accounts you have open, and how close you are to the debt limit on each account. Having multiple debt accounts may not be detrimental to your score if they are managed wisely.
Length of Credit History – 15%
Older credit users are at a slight advantage in this category, but even new credit users can reach a high score if the other categories are in good standing. In this group your credit score is weighted based on how long your credit accounts have been in use, and the rate of usage on each one.
Credit Mix – 10%
Your credit score is also calculated, minimally, by the types of credit accounts you have open. These can include retail accounts, installment loans, credit cards, mortgage loans, and finance company accounts.
New Credit – 10%
This is another category that isn’t as heavily weighted, but is still important. Your credit score in this category is based upon how many new credit accounts you have open and the number of requests you have for new credit. If you open many new credit accounts rapidly, it will decrease your overall score.
Follow this link for more detailed information on understanding your Fico credit report.