What are the basic credit scoring components?

Credit scoring is based on certain aspects of your financial behavior. Some elements are weighted much higher than others, so it is important to understand how your credit is scored if you want to improve your scores.

35% Payment History

Your payment history is more important than any other credit scoring factor. See the short and long-term effects of your payment history on your credit scores.

30% Debt Balances and Ratios

How much you owe in relation to your credit limits is a major factor in credit scoring. Large debts with some accounts can hurt you more than others also.

15% Duration

Credit scoring rewards long-term use of credit. See how your seasoned credit accounts are the cornerstone of your credit history.

10% New Credit

Signing up for or applying for new credit accounts always lowers your credit score initially. Find out why you should only apply for credit when needed. Also discover how certain exceptions may apply for vehicle or mortgage loan inquiries.

10% Credit Mix

A small portion of your credit score factors in your usage of various classifications of credit accounts. See how a proper mix of revolving and installment loan accounts can help you reach higher scoring thresholds.

This may appear to be a simplified list of credit scoring components, which it is. There are actually many factors that go into credit scoring, but they tend to follow the above allocation.

There is actually an entire list of individual credit score factors that contribute to credit scoring. These individual factors generally fall within one of the categories listed above.

Actual credit scoring formulas are trade secrets. The creators of these formulas include Fair Isaac Corporation as well as the three main consumer credit bureaus: Experian, Equifax and Trans Union. Some credit formulas are variations of those created by Fair Isaac. Others are proprietary formulas created by credit bureaus using their own internal resources.

Despite all of this secrecy surrounding the credit scoring formulas, the general components of credit scoring are eagerly shared by those who control it. The information provided above regarding credit scoring components is made available by Fair Isaac Corporation and the credit bureaus that adapt their formulas from the FICO models.

Kenneth Long
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Kenneth Long

President at Debtors Unite
Kenneth Long is President of Debtors Unite, Inc. as well as President and Vice Chairman for Vision Credit Education, Inc. He served as a regional coordinator for the North Carolina Saves campaign. Long co-founded the Wake EITC Coalition along with Family Resource Center of Raleigh.

Long is a graduate of the University of North Carolina at Chapel Hill with a B.A. in Industrial Relations. He subsequently received his Certificate in Nonprofit Management from Duke University. His Certificate in Financial Planning was issued by Florida State University.

Long has achieved the Accredited Credit Counselor and Accredited Financial Counselor certifications through the Association for Financial Counseling, Planning and Education. Long originally achieved the Certified Credit Counselor designation through the National Institute for Financial Education.

In addition to years of nonprofit leadership, Long has been an innovator in the field of volunteer tax return preparation programs. He assists volunteer associations and nonprofit organizations who seek to integrate credit counseling and asset-building programs with free personal income tax preparation. His approach to using free credit reports as both an incentive and a screening tool for placement into asset-building programs has been shared with members of the National Community Tax Coalition, the EITC-Carolinas Initiative of MDC, Inc. and nonprofit groups across the Carolinas.

Long assists members of our armed forces in the Carolinas, Iowa, Rhode Island, Georgia and Germany with financial readiness. Please support our Soldiers, Marines, Airmen and Sailors!

Favorite quote:

"The democracy will cease to exist when you take away from those who are willing to work and give to those who would not."

Thomas Jefferson
Kenneth Long
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