Breakdown Of Credit Scores

There are five factors that impact a consumer’s credit scores; Payment history, Credit balances outstanding,  Credit history longevity,  They types of credit the consumer has has in his or her profile, and credit inquiries.

1. Payment history of consumer  – 35%  of the consumer credit scores is impacted by the payment history of the consumer:     

A consumer paying his or her bills on time and/or in full will have the best greatest possible impact on his or her credit score.  Any late payments, collections, judgments, and charge off accounts will have extremely negative impact on a consumer’s credit  scores.  A consumer being late on a high monthly credit payment will have more severe consequences on his or her credit scores than being late or missing a lower monthly credit payment.  Credit delinquencies in the most recent two years will have more of a detrimental affect and carry more weight than those delinquencies that are older than two years.

2. A consumer’s outstanding credit balances  – 30% of the consumer credit scores is impacted by the credit balances the consumer carries.  

The consumer’s outstanding credit balances is actually the available credit to the available credit limit ratio andf is the ratio between the current outstanding credit balance and the total available credit available.  Maxing out a credit card will yield a high ratio and it will have a very negative impact on the consumer’s credit scores. This factor marks the ratio between the outstanding balance and available credit.  To maximize your credit scores, you should have a ratio of less than 25% where the credit balances is under 25% of your available credit limit.

3. Consumer’s overall credit history –   15% of the consumer’s credit scores is impacted by the consumer’s overall credit history. 

A consumer’s overall credit history is the longevity on how long the consumer has had a particular credit or credit accounts.  The start date in judging longevity starts from the date the credit account was opened.  Never close out an open credit account even though you are not using the credit account.  Open tradelines are priceless.

4.  A consumer mix of credit and types of credit-   10% of of a consumer’s overall credit scores will be derived by the mix and types of credit the consumer has in his credit profile.

A consumer’s mix of credit and types of credit he or she has in their credit profile has a 10% impact of their overall credit scores.  Mix of credi and types of credits include revolving credit accounts such as credit card accounts, automobile loans, student loans, and mortgage loans.  Have a variety of different types of credit is and advantage of maximizing your overall credit scores than just having one type of credit such as credit card credit.

5. Inquiries in a consumer’s credit report – 10% of a consumer’s credit report is impacted on the inquiries the consumer has on his or her credit report. 

The number of inquiries a consumer has on his or her credit report will have a 10% impact on their credits scores.  This is credit inquiries in a six month period window.  Every hard credit inquiry will negatively impact a consumer’s credit score.  The maximum number of credit inquiries that will  reduce the consumer’s credit score is 10.  For example, 11 or more credit inquiries within a six month month window period will have the same negative results as the 10 inquiries.  Each credit inquiry can drop a consumer’s credit scores by two to five points for a maximum of 25 points for ten or more inquiries.  If you run your own credit reports or you have a mortgage company run a soft pull, that will have no negative impact on your credit scores. yourself.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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