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Once again, I’ve hit upon a subject that there is a LOT of conflicting data about. That’s how your credit score is determined. I see so much knowledge out there, it’s hard to know who’s right. Well, here’s the skinny on credit scoring, right here at the Credit Report Coach Blog!

Creditors apply a ‘Risk-based Pricing’ technique when dealing with low scorers. Customers and borrowers with low credit scores are charged higher rates of interest on loans by creditors. that forms the base of ‘Risk-based Pricing’.

How Your Credit Score Is Determined:

Your credit score is computed after obtaining vital info about you, including:

- Payment history
- Debts
- Credit inquiries
- Credit history
- Job and assets
- Bankruptcy, foreclosures and judgments

History of Payments

Generally 35% of your credit score depends on your payment record. It depends on the number of bank accounts, loans, credit cards and retail accounts you have.

Debts

30% of your credit score is the outcome of your debts. Untimely, late or no payments are detrimental to your score. The bureaus compare the ratio of revolving

debts to your total available credit. That means, whether you go by your credit limits, your score will likely get dinged.

Credit Inquiries

10% of your credit score depends on the kind of credit used in the past, like installment loans, consumer finance or revolving credit. Another 10% of your credit score is based on the kind and amount of credit obtained recently. An increase in the number of new credit accounts could aftereffect in a decrease in your credit score.

Credit History

15% of your credit score depends on your past credit record. The duration of repayment involved calculates your creditworthiness.

Your Job and Assets

Financial stability and having a steady job is another factor that helps in calculating the credit score.

Bankruptcy, foreclosures, and judgments affect your credit score significantly. However, credit scoring models do not include these factors while computing the actual score. But, these factors do affect your score negatively and credit scoring agencies may deduct around 160 to 220 points from the credit score of a consumer who has filed for bankruptcy.

Orginal post by Leeia Ladipoh

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