What makes up the score?
m
35% = based on payment history
(i.e. on-time pays or delinquencies)
More weight on current pay history (reference right side of sheet)
m
30% = capacity (capacity is King)
m
15% = length of credit
m
10% = accumulation of debt in the last 12-18 months
# of inquiries
opening dates
m
10% = mix of credit
installment (raises) vs. revolving (lowers)
# of finance company loans the more, the lower the score
What actions will hurt the score?
m
Missing payments (irregardless of $amounts…It
will take 24mo to restore credit with one late
pay)
m
Credit cards at capacity (i.e.maxing out credit cards)
m
Closing credit cards out (thislowers available capacity)
m
Shopping for credit excessively
m
Opening up numerous trades in a short time period
m
Having more revolving loans in relation to installment
loans
m
Borrowing from finance companies
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What doesn’t affect the
score?
m
Debt ratio
m
Income
m
Length of residence
m
Length of employment
Approximate Credit Weight for each year
m
40% = current to 12 months
m
30% = 13-24 months
m
20% = 25-36 months
m
10% = 37+ months
How to improve the score?
m
Pay down on credit cards
m
Do not close credit cards because capacity will
decrease
m
Continue to make payments on time (older late pays
will become less significant with time)
m
Slow down on opening new accounts
m
Acquire a solid credit history with years of experience
m
Moving revolving debt to installment debt.
Developed by Lending Solutions Consulting, Inc.
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