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What makes up your credit score?

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By: Joy Mali
on 18th Oct,2013

Most people want to have good credit. They will work hard to keep their credit score as high as possible.
What makes up your credit score?


Most people want to have good credit. They will work hard to keep their credit score as high as possible. The problem is that most people do not know how the credit reporting agencies calculate their credit score. They might not even realize that there are three major reporting scores and each one calculates the credit score differently. There is also another credit score called the VantageScore 3.0 that is being used and could become a major factor in people’s credit history.


Instead of guessing about how your score is calculated, it is better to get credit scores explained. There are five major things that are used to calculate your score and they all have a different effect on your final score.

The Top 5 Factors

1. Payment history – This is the single most important factor when it comes to determining your credit score. It makes up approximately35% of your score. The score is a reflection of your payment history with your accounts. The amount of history that the reporting agencies look at varies, but it can be as long as 48 months.

2. Amount owed on credit – When you view your credit score and report, you will see the balances you owe. This is called your credit utilization and it makes up 30% of your score. If you have $1,000 of available credit and have a balance of $500 your utilization rate is 50%. The higher your credit utilization is, the lower your credit score will be.

3. Length of credit history – Your age will be a factor in how long your credit history is. If you are young and just starting to establish your credit, you won’t really have any history. It makes up 15% of your score and is something that takes time to build. The new Vantage Score 3.0 is not going to rely on this information as much as the traditional type of credit score.

4. Type of credit – There are different types of credit. Personal loans, credit cards and mortgages will all be reported to the credit agencies. To maximize the 10% of this you should have several different types of credit such as credit cards, mortgages and installment loans established.

5. New Credit – Your score could go down if you open up too much new credit at the same time. This risk factor makes up 10% of your score. It takes into account both the new credit that you have opened and the amount of new credit you may be trying to establish.

Other factors


These five factors make up the majority of your credit score, but when you ask what is a credit score, you should also take into account other negative issues that could affect your score. Bankruptcy, collection accounts, court judgments and other issues that are reported to the credit reporting agencies will also lower your score. The VantageScore 3.0 is trying to make sure that this type of information is removed as soon as it is handled in order to lower the impact on your credit score.

What should you do?


It is not enough to know what makes up your credit score. You also need to know what to do once you understand it. The idea is to work to keep your score as high as possible. This will help you if you need to borrow money, when you go on a job search, when you open accounts with utilities and when you pay for your car insurance. The credit scoring system is in place and is utilized regularly by lenders, potential employers, and lenders it is your responsibility to monitor your score. You need to learn how do you get a credit score and then you need to check it on a regular basis. If you see your score has dropped, take the various factors into account and see what you can do to improve your score. Little changes can make dramatic improvements in your score in a relatively short time.


The people with the best credit scores are the ones that take it seriously. They know what their score is and how it is calculated. They are being responsible and proactive to protect themselves and their credit score.

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