What makes up your credit score?

A credit score is determined by many factors.  Knowing what effects your credit is the first step to being able to either improve or maintain your score.  Credit is definitely an area of stress and confusion for many people looking to get a mortgage.  We want to help inform people in Murfreesboro hoping to become more aware of the aspects of a credit score.   There are 5 main factors that effect credit and every aspect has a varied level of importance to the overall score.
The largest factor is your credit history.  35% of your score is dependent on your history of paying

creditors.  These accounts include mortgages, installment loans, credit cards, and retail accounts.  Collections are very harmful to a credit score.  Having a flawless history of on time payments does not mean a perfect credit score.  Remember there are many factors that come into play.
The second largest factor is how leveraged out you are.  30% of your score is determined by how overextended your credit makes you.  This consists of every account that money is owed on, both how many accounts and how much is owed on each.  It is also dependent on the amount of total credit available and how much of the total is currently being used.  Paying balances off shows good credit habits and helps improve the overall score.
The third aspect is the amount of time that accounts have been open for.  This makes up 15% of the credit score pie.  Account activity also comes into play here.  The general idea is that an account that is consistently used over a 10 year period will help a credit score more than a 6 month old account that has only been used once.  A longer period of time shows more about the owner account.
10% of the score pertains to if you are taking on new debt.  Credit requests and many new accounts can affect your score.  However not all credit requests hurt your score.  Credit reporting and Lender Pre-Approvals have no negative effects on your credit.
The final 10% is determined by having a good mix of types of credit.  The type and quantity of the mix is what is paid attention to for this section. 
Credit can either work for or against you.  It is a scary subject and few people are schooled on the matter.  There is no need to be scared of credit.  Mastering and managing your score can make a big difference in your life.  Feel free to email or call us at (615) 426-3182 If you have any questions about credit or getting a mortgage in Murfreesboro. 
Kaplan Mortgage Partners
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