credit scoring

Credit Scoring is just one of the many factors that loan officers look at when trying to make a loan. Many people wonder what a credit score is and what does it consist of? Every credit scoring agency uses a different formula to determine your credit score. To help you, here are just a few things that many agencies consider: (Experian, 2010)

Payment history (Number and severity of late payments)
Type, number and age of accounts
Total debt
Public Records (bankruptcy, interest in new credit, etc...)

Credit scores do not consider the following: (Experian, 2010)

Your salary or employment history
Your age
Your race, color, religion, national origin, sex or marital status
Where you live

Credit scores reflect patterns in your credit payment over time and usually put a bigger emphasis on recent information. Some suggestions on how to improve your credit score include but not limited to: (Experian, 2010)

Pay your bills on time. Delinquent payments have major negative impacts on your credit score
Keep balances low on credit cards and other "revolving credit"
Pay off debt rather than moving it around. Avoid closing unused cards as a short-term strategy to improve your credit score
Apply for and open new credit accounts as needed
Owing the same amount but having fewer open accounts may lower your credit score

Questions regarding credit scoring or obtaining a free credit report visit www.annualcreditreport.com.

Works Cited

Experian. (2010). Improve Your Credit Score. Retrieved March 1, 2010, from Experian.com: http://www.experian.com/credit-education/improve-credit-score.html

Experian. (2010). What is a Good Credit Score? Retrieved March 1, 2010, from Experian.com: http://www.experian.com/credit-education/what-is-a-good-credit-score.html