What elements factor into the calculation of a credit score?

Your credit score is based on the various information that is present in your individual credit report. The score is based on the different categories, which vary amongst different scoring models. In addtition, how much weight each category holds in a specfic scoring model also varies.

However, there are a handful of core elements that most likely factor into any type of credit scoring model. These are important components to keep in mind when attempting to get a better understand of and/or improve your credit score.

Elements of your credit score include:
- Payment history
- Amounts owed
- New credit
- Types of credit used
- Length of credit history

A clean payment history without missed or late payments is something to strive for. In addition, paying attention to total amounts owed versus total available credit is recommended. It is generally a good idea to not utilize a large portion of your available credit if at all possible.

Closing accounts is a complicated topic. Closing an account can reduce your length of credit history and can also reduce the ratio of credit used versus credit available. But in some cases, closing an account can be beneficial. It is important to examine each account carefully to determine whether closing it or keeping it open is the right choice.

For more detailed information on the topic of credit scores and what factors into the credit scoring equation, be sure to read our recent article, How a Credit Score is Calculated.

Posted in Internet Service, Credit Cards, Loans, Miscellaneous, Insurance, Personal Finance

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This entry was posted on Wednesday, July 2nd, 2008 at 7:06 am and is filed under Internet Service, Credit Cards, Loans, Miscellaneous, Insurance, Personal Finance. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.