ICFE eNEWS #19-02 - January 21st 2019
Credit Scores - How Are They Figured?
By Jim Garnett, a/k/a Ask Mr.G, a member of the ICFE's Board of Educational Advisors
How Is My Credit Score Figured?
Your credit score
is calculated from five basic categories. The percentages
reflect how important each category is in determining your
35% Payment History. As
you can see, this is a very important factor. This is because
lenders tend to believe that the way you have handled credit in
the past will predict how you will handle credit in
30% Amounts Presently Owed. This
category includes such things as how much do you owe on your
house or your car, the number of accounts with balances, and the
proportion of credit limits
used. A good rule of thumb is to keep you credit card
balances at no more than 30% of their credit limits
(a wiser plan is to carry no balance on your cards at all!).
15% Length of Credit History. This
data includes not only the amount of time you been using credit,
but how long each account has been opened. The longer "track
record" you have in using credit wisely,
the more credit worthy
you will be.
10% New Credit. This
would include the number and type of recently opened accounts
and the number and timing of recent credit inquiries.
10% Types of Credit Used. This
category contains information on the number of loans and
available credit from credit cards.
Remember that your credit score
takes all these categories into consideration, not just one or
two of them. The importance of any separate factor, good or bad,
depends largely upon how it is viewed in relationship to your
overall report. There also are alternate ways to show your credit worthiness
like faithful payments on utility bills, rent, consumer credit agency
payments, etc. that do not reflect on your credit score
because they are
not reported to the credit bureaus.
Preview Jim's latest book, "The
Nuts and Bolts of Cash and Credit: An Encyclopedia of Financial
© Jim Garnett, The Debt Doctor
AskMrG Consulting, LLC
2216 SW 35th Street
Ankeny, IA 50023
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Also, visit the ICFE's new Web site: StudentDebtHelp.org
Paul S. Richard
President - Executive Director
Institute of Consumer Financial Education (ICFE)
About the ICFE:
The Institute of Consumer Financial Education (ICFE) was founded in 1982 by
the late Loren Dunton (creator of the Certified Financial Planner (CFP)
designation and founder of the College for Financial Planning in Denver, CO.)
The ICFE is dedicated to helping consumers of all ages to improve their spending
practices, increase savings and use credit more wisely.
The ICFE is an
award winning, nonprofit, consumer education organization that has helped
millions of people through its financial continuing education courses programs
and resources. In addition to eight Certification courses covering identity
theft, credit files, credit repair and credit scoring, among others, it also
publishes the Do-It-Yourself Credit File correction Guide, which is updated
annually. The ICFE has distributed over one million Credit/Debit Card Warning
Labels and Credit/Debit Card Sleeves world wide.
The ICFE is a partner
with the national Jump$tart Coalition for Financial Literacy and the California
Jump$tart chapter. The ICFE staff is also active with San Diego Saves and
Military Saves, both offshoots of America Saves.
The ICFE is also an
on-line help for consumers who spend too much. ICFE's spending help was featured
in PARADE Magazine in the Intelligence Report section. The money helps and tips
are from the ICFE's Money Instruction Book, our course in personal finance.
The ICFE helps consumers and students with mending spending, learning about
the proper use of credit, budget and expense guidelines, how to set up and
implement a spending-plan and also how to access financial education courses and
how to teach children about money. Other ICFE services include: Ask Mr. G
library, a free eNews service, and an online resource center for students,
parents and educators, plus financial education learning tools in the ICFE Book