Credit Scoring 411 - The Bills.com Blog

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Credit Scoring 411

Tuesday, Jul 21, 2009

Question: I have pulled my credit score and report and have paid 7 accounts off that were sent to collection. Will that up my score?

Answer: Credit scoring is a complicated calculation which considers many factors to produce a numerical representation of the likelihood that you will default on any new credit extended to you. The most important factors used in calculating your credit score are your payment history and your total amount of debt. Combined, these two aspects of your credit history account for 65% of your credit score, so improving either one of these factors should raise your credit score significantly. I'd just about always suggest to get out of debt fast.

Very quickly, if you want a free debt consultation with one of Bill's approved debt help partners, click here:
Free Debt Consultation

Since you are worried about your score, let me tell you a bit more about credit scores. The most important step in understanding your credit score is to know what a credit score is and how it is determined.
A FICO credit score comes from the Fair Isaac Company. Three quarters of all lenders use the FICO credit score when considering requests for loans or credit which is why this is an integral part of understanding your credit score.

Given below is a rough formula used to calculate your score:

* 35% on your payment history
* 30% on the amount you currently owe lenders
* 15% on the length of your credit history
* 10% on the number of new credit accounts you've opened or applied for (fewer is better)
* 10% on the mix of credit accounts you have (mortgages, credit
cards, installment loans, etc.)

The best way to improve your credit score is to pay your bills on time and manage your credit wisely. The most important item is your mortgage. Make sure you pay it on time every month in order to maintain a good credit score. Installment loans, where you borrow a set amount to buy new furniture or appliances, for example, are given more weight than credit cards.

Lastly, for more information on credit reports visit the Bills.com Credit Report Resources page.

I hope this information helps you Find. Learn. Save.

Best,
Bill
www.bills.com

Also, make sure to get a free financial health check-up with Bills IQ!

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Bill has answered all sorts of questions and has been able to provide those in need of financial guidance with helpful and valuable advice and information on their specific financial area of interest. If you need specific guidance on any of the above mentioned financial areas, feel free to Ask Bill your financial questions and get better informed. Also, make sure to get a free financial health check-up with Bills IQ!

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