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The Big Numbers

Your credit report is very important, it is an electronic copy of your credit activities. More importantly it is a record in how you use your credit and how much you have available. It also gives a snapshot on you payment history which is how lenders decide to extend credit offers.

Every item of information contained in your credit report at the three national credit bureaus (Equifax, Trans Union and Experian) contributes either positively or negatively to your credit score.

The general scoring range is 350-850. Fair Isaac divides the scoring range into five risk categories:

*780-850 Low Risk
*740-780 Medium-Low Risk
*690-740 Medium Risk
*620-690 Medium-High Risk
*620 and Below High Risk or “sub-prime”

How this impacts your score?

Fair Isaac scoring models place a great deal of weight on how recently you had a credit problem. In a proportional sense:

a major delinquency in the past year has a 93% negative impact, while
a major delinquency between 1-2 years-old has about a 60% negative impact,

a major delinquency between 2-3 years-old has a 44% negative impact,

a 3-4 year old delinquency has a 33% negative impact, and

any delinquency older than 4 years has only a 22% negative impact.

Credit scoring uses five main areas of information to calculate the score:

Payment history = 35% of the score’s weight
Amounts owed = 30% of the score’s weight
Length of credit history = 15% of the score’s weight
New credit inquiries = 10% of the score’s weight
Type of credit used = 10% of the score’s weight

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