The Breakdown Of Credit Bureau Rating Formulas

Your credit bureau rating, which is your Fair Isaacs Corporation (FICO) score, is made up of several components. The components that make up your credit bureau rating includes payment history, amounts owed, the length of credit history, new lines of credit and the types of credit used. Each of these components make up the following percentages of your FICO score: payment history is 35 percent of the score; amounts owed are 30 percent; length of credit history is 15 percent; new credit 10 percent; and, types of credit are 10 percent of the score.

Payment History

Your payment history is comprised of the specific types of credit accounts that you have paid on over time. This includes your mortgage, credit cards, auto and personal loans, just to name a few. Your payment history will also indicate any publicly reported adverse items such as bankruptcies, judgments, liens, wage garnishments as well as past due payments. It will take into account when an adverse item occurred and how long it remained adverse until it was resolved.

Amounts Owed

Amounts owed are the next largest component of your FICO score. This category measures how much in debt you have outstanding. It looks at total debt, a breakdown of that debt by type of account or line of credit and the number of accounts with open balances. It will compare the amount of debt outstanding relative to the amount of available credit to determine if you have reached your maximum debt level.

A person with a large outstanding balance will be seen as a greater credit risk in comparison to a person with a lower balance of outstanding debt, relative to their available credit.

Credit History Length

This measure looks at when credit was created for a particular account or credit line. It also measures the amount of activity within an account and the amount of time between account activity.

New Lines of Credit

Opening new credit accounts and even submitting applications for new credit has an effect on your FICO score. FICO measures the number of recently opened credit accounts as well as the proportion of accounts opened by type. Recent credit inquiries includes any applications made, inquiries made on your behalf such as an employment or other type of transaction that uses your credit information (such as applying for insurance). The time between inquiries and credit account openings are measured as well and FICO looks at the amount of time new credit is established after an adverse item has been reported.

Types of Credit

The presence, prevalence and recent information concerning the various credit accounts you have are the final component that goes into your FICO score. This includes all consumer credit accounts, loans, installment accounts, etc. The proportion of credit allocated to the different types of credit is an indication of your creditworthiness that is measured.

It should be noted that the FICO score is comprised of all 5 of these measure, weighted proportionately. The prevalence of items within a category may cause that particular measurement to go up or down, depending on the types of reported items that are measured. A lender may look at other factors such as employment and income, but these are not standards that have a bearing on your FICO score reported by the credit reporting agencies.


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