Know Your Auto Credit - Factors that Effect Your FICO Credit Score Rating
FICO stands for Fair Isaac & Company and is a score based on your credit report. Your personal credit history and information is used in order for a lender or creditor to extend you a loan or line of credit. No one really knows the mathematical model to calculate this three digit number.
For more information see - Credit FICO Score Guidelines.
The following are some of the factors that affect your fico score:
Payment History
Past payment history counts for about 33% of the score. The less late payments the better off you'll be. Recent late payments have a greater impact than old bankruptcy. The most recent two years of credit history in your credit report are weighed higher than past history.
Use of Credit
The higher amount of debt that you have the higher the risk you are and the lower your FICO score. This is also referred to as high income debt ratio. Credit use counts for about 29% of the score. Low credit card balances are far better then the same balance concentrated on a few cards, which are close to their maximum limits. Too many credit cards can also bring down the score. Closing accounts can negatively impact a credit rating if the entire profile is not considered. The fewer the credit accounts open the better. Additionally, the less credit inquiries the better for your FICO score. If there are too many credit inquiries or credit checks in your credit report, the lender may think you are trying to open numerous accounts.
Credit History
The longer your credit report history, the better as long as your payments are made on time. Your credit report employment history is also a plus. The longer you have been working at an employer the better. Beware of open credit; open credit accounts are those accounts that are open with no debt and have not been used for over one year. This may count against you when applying for any credit. The lender or creditor may say that you can theoretically max out these accounts and raise your income to debt ratio. Credit history counts for about 17% of the score. Longevity counts in your favor. The longer the accounts have been open, the better your credit score. Opening new accounts and closing seasoned accounts can bring down the score considerably.
Types of Credit Used
Counts for about 11% of the score. Secure financing accounts score lower than bank or department store revolving accounts.
Inquiries
Count for about 10% of the score. Multiple inquiries could indicate a negative risk if several cards are applied for or if other accounts are near their maximum. Multiple mortgage or car inquiries within a fourteen-day period are counted as one inquiry. |
