The Anatomy of a Credit Score

Written by on October 9, 2012 in Money - No comments | Print this page


Credit scores can be a fairly confusing thing. Sometimes it’s hard to understand what exactly makes up a credit score. What are the parts of it? How much does each part matter? Well, when you begin to learn more about credit scores, you learn that they can be much easier to understand than you might have initially thought.

Let’s take a look at the different parts of a credit score:

Negative Items

This is by far the most important thing when it comes to your credit score. Most of your credit score has to do with your credit history, so this is the biggest chunk of your credit score. If you have negative items on your credit report (late payments, collection accounts, charge offs, etc) your score will be greatly affected.

Length of Time

How old you are and how long you’ve had credit plays a role in determining your credit score. The longer you’ve had a credit history, the better. If you haven’t had credit for a very long time, then they will consider you inexperienced when it comes to credit, and your score will be lower.

Open Credit

How much credit you currently have available to you will also affect your credit score. This one isn’t nearly as important as how much revolving credit you are using, but it can still hurt or help your score.

Type of Credit

The type of credit that you are using will also impact your credit score. Basically, if you are using a lot of high-interest financing or have a lot of installment loans, your score could be impacted negatively (keep in mind that a mortgage or auto loan aren’t considered bad installment loans).

Number of Inquiries

The last thing that can affect your score is the number of inquiries you have on your report. This one holds the least weight of all of the factors, but it still is a factor nonetheless. Too many recent inquiries may make you look like a high risk borrower.

Revolving Credit

The next important part of your credit score is how much revolving credit you are using. Lexington Law, a credit repair agency, explains revolving credit’s effects this way: “Basically, this part of your credit score adds up the total of all the revolving credit you have used, and then divides that by the sum of your available revolving lines of credit.” What the credit bureaus are trying to find out here is how much credit you are using versus how much is available to you. If you are using almost as much as you have available to you, that is a bad sign to them, and they will consider you a higher risk.

So, there you have it, the things that make up your credit score. This is very important knowledge to have. It is important to know what makes up your credit score, so you can make more informed decisions moving forward. It is good to know how the things you are doing are affecting your credit score.

Keep all of these things in mind when you’re making decisions regarding your credit. If you do this, and work to stay on top of your credit score, you should be rewarded with a beneficial credit score.

This is a guest post.  Nicole is the author of this post. She has spent several years learning about credit scores, and enjoys sharing that knowledge with others.

Image courtesy of Stuart Miles /


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