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Credit scores and their make up

Credit reports are made on the basis of various factors. These assert the score, which is then processed through software and undergoes calculations, before getting the final score. There are certain factors which weigh more as compared to the others. While trying to improve the credit score, debtors should focus on the factors which have more impact as it the improvement in the scores will also be more. There are five factors which make up the credit scores.

a) Payment history of debtors

The payment history of debtors is the most important factor which influences the credit reports. The records of the payment history estimate to about 35% of the total credit report structure. This includes all the payments and non payments of the past like credit card bills, dues, loans, etc. Timely payment results in good credit score while a late payment adds up to a poor credit score.

b) The amount of credit being used

The amount of credit being used estimates to about 30% of the total score. How much credit is being used by the debtor currently influences the credit scores. Past debts which have not been cleared but are still being used are also included in the same.

c) Duration of the credit

How long the debtors retain the credit estimates to 15% of the credit score make up. The older the credit, the higher are the rates of interest and debts. Hence settling older debts and credits also helps to reduce the number of debts and hence improve the credit score also.

d) Number of times the credit has been pulled

The number of times the credit has been pulled makes up for 10% of the total credit score. Hence the credits which have been pulled for more than once are the ones that can cause trouble and need to be settled first.

e) Various kinds of credits the debtors have

The different types of credit also add up to about 10% of the credit score make up. Dividing your credits into credit card bills, utility bills, loans, etc. results in more problems. They further reduce the credit score. Also some credits like big loan amounts influence the credit score more than low amount credit card bills.

Try and keep the available credit to pending debt ratio below 25%. This usually helps in increasing the credit score almost immediately and helps to control the credit score for a longer duration.