Your Credit Score Is A Result Of These 5 Factors

    Your Credit Score Is A Result Of These 5 Factors
    Your Credit Score Is A Result Of These 5 Factors

    The most significant factor affecting any US citizen’s lifestyle is the anxiety of maintaining the required credit score (also known as FICO score). And the anxiety is obvious because this score decides whether your request for a mortgage will be approved or rejected. If approved, than the applicable interest rates are influenced by it. Jobs, credit cards, and almost every financial activity or item is the result of one’s credit score.

    I have spent all the years of my life to keep up this magical figure. According to me, there are five major factors that influence the volatility of the score. Understanding these factors will definitely help any individual to focus on important issues rather than inconsequential ones.

    Your Payment History: 35%

    I am not very sure about the exact figure but it may vary from 32% to 36% depending on the respective scoring bureau. However, one thing I am quite certain about is the ranking of this factor. It has to top the list because if you pay all the loans and bills on time, you are reliable person to lend.

    To have a good score make sure that you never miss a payment irrespective of the importance of payment. This is the only way to reach the peak. However, if you miss a payment do not prolong it because it may affect the score even further.

    Ok. It’s quite confusing. Let me put it this way. The extent of negative effect on your credit score depends on these 3 factors:

    Last non-payment

    If you don’t pay a bill for a longer time, it may adversely affect your score. However, if you had missed payment years ago and you have been regularly paying all the bills since then, it may not affect your score much. So it’s wise to focus on recent payment that severely influences the score.

    How many missed payments?

    If you an excellent score and you missed paying a bill once, it would negligibly influence the score. But if you keep neglecting payments on time, you are sure to have a low score.

    The size of botch

    Missing a payment on one credit card once in a while is okay. But if it reaches the collection agency to get money recovered from you, it’s big. However, even bigger is the mistake of filing a bankruptcy.

    The Unpaid Amount: 30%

    In the upper section, when I informed you that missing a payment once in a while is okay, it doesn’t mean that the amount of missed payment is hundred thousand dollars. Size does matters when it comes to non payment.

    Your credit score depends on the amount of money you owe to all the possible sources of credit which includes credit cards, mortgage, vehicle loans, and any such credit. An average American uses lees than 30% of the credit available to him. And it’s good to be an average American rather and keep the unpaid amount low.

    Keep a check on all your credit account and do not let the credit exceed 30% of your credit limit. Remember, the importance of this factor for your score is 30%. If you neglect this point, forget good scores.

    If you use the entire credit limit, it is obvious to the lender that you are unable to manage the repayments and hence, they avoid lending you further.

    The duration of credit: 15%

    The time of credit is used as an influencing factor because it shows how concerned you are about the repayment. Hence, it carries 15% importance of your credit score.

    This is factor which you can use to improve your score. Don’t miss any payment even if you have lost your job or are very ill and hospitalized. Manage some money to pay the minimum amount every month. It’s not impossible. The people who have been maintaining a high credit score have gone through worse conditions, but they manage to keep a good payment record.

    When did you last apply for credit? : 10%

    On an average, the period before which an American Citizen applied for credit is 20 months ago. Why does this affect your score? It is because if you recently apply for a new credit (say mortgage), it shows you are in need for money. And wanting money means you are not in a good financial condition. So they deduct your score.

    When you apply for any kind of loan, many out of these lenders check your score before they lend you some credit. Credit lenders checking your score impacts your score harshly. When you keep applying for loans the frequency of score checks by lender increases and your score keeps getting low. A better way is to pull up your credit score from the bureau and hand it over to the lenders before they do it. No, checking one’s own credit score doesn’t affect the score.

    The nature of credit: 10%

    Credit can be further divided into 2 broad categories. A revolving credit and an installment credit. Installment credits are the ones that you borrow once and keep paying part of it every month like mortgages, car loans, personal loans, etc. Whereas, the payment that you make every month in order to get credit again is called a revolving credit. An example of revolving credit is a credit card. This kind of credit affects your score. However, the installment credit is worst. They use a simple formula. The effect on your score depends on the level of difficulty to acquire the loan.

    Generally, people with higher credit score have a good blend of both types of credit and from many sources. So there is lesser risk exposure.


    FICO score is a good source for lenders to gauge the credit worthiness of any consumer. However, for consumers, it is a drawback. It is purely based on numbers and is inhuman. They don’t care if you are severely ill and on the verge of dying. They want numbers.

    Now that you know the factors that can severely damage your score, try to avoid the above mentioned sins. In short, have a good payment record; borrow less and for lesser time.


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