Your Credit Score

Many Americans who are trying to use credit often ask, how do they figure out my credit score? This question is frequently asked by anyone who is trying to figure out how to raise or fix their credit score or enhance credit repair efforts. MyFICO.com has a good basic chart to help you understand what makes up your credit score.

Your credit score is basically made up of five parts. The first part is Payment History which makes up about 35% of your credit score. If you make all of your payments on time then you will be benefiting your credit score.

The next largest part is Amounts Owed. This part makes up about 30% of your score. If you have a mortgage, auto loan and credit card debts, these are the balances that you still owe on them. The higher your balance owed, the lower your credit score.

The third largest part (15%) is the Length of Credit History. The older the account is will help your credit score. Newer accounts actually hurt your credit score in the beginning due to their new commitment on your financial burden.

The final two parts make up the balance of your credit score and are about 10% each. New Credit and Types of Credit are those parts. New credit can be good or bad because of the inquiries that are now on your account will hurt your score and other things like “credit history” can hurt your score due to the new credit. But if you keep a good payment history the New Credit numbers will not hurt your score and will balance themselves out.

The Type of Credit that you get will also count to credit score. Having a long term mortgage and automobile loan will be better for the type of credit you have rather than credit card debt. If the majority of your credit is in the form of Credit card or “non-secured” debt it will hurt your score.

Opening a new account may actually cause your credit score to drop from 10-30 points but if you keep good payment history on the account, you will see that recover fairly quickly.