The first of the 5Cs of Creditworthiness is Character. That is your credit history and score. Here is how an 850-point credit score is determined.
Payment history (35%) 297.5 points
The first thing any lender wants to know is whether you’ve paid past credit accounts on time. This helps a lender figure out the amount of risk it will take on when extending credit. This is the most important factor in a FICO Score. Be sure to keep your accounts in good standing to build a healthy history.
Amounts owed (30%) 255 points
Having credit accounts and owing money on them does not necessarily mean you are a high-risk borrower with a low FICO Score. However, if you are using a lot of your available credit, this may indicate that you are overextended—and banks can interpret this to mean that you are at a higher risk of defaulting.
Length of credit history (15%) 127.5 points
In general, a longer credit history will increase your FICO Scores. However, even people who haven’t been using credit for long may have high FICO Scores, depending on how the rest of their credit report looks. Your FICO Scores take into account:
- How long your credit accounts have been established, including the age of your oldest account, the age of your newest account and an average age of all your accounts
- How long specific credit accounts have been established
- How long it has been since you used certain accounts
Credit mix (10%) 85 points
FICO Scores will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. Don’t worry, it’s not necessary to have one of each.
New credit (10%) 85 points
Research shows that opening several credit accounts in a short amount of time represents a greater risk—especially for people who don’t have a long credit history. If you can avoid it, try not to open too many accounts too rapidly.
Did you know there are other scoring models that lenders can use?
Check these out:
FICO SBSS (Small Business Scoring Service): This is a proprietary scoring model developed by FICO specifically for small businesses. It has a scoring range of 0 to 300, with a higher score indicating a better creditworthiness.
Dun & Bradstreet Paydex score: This is a scoring model developed by Dun & Bradstreet that is based on a business’s payment history. It has a scoring range of 1 to 999, with a higher score indicating a better creditworthiness.
Experian Business Credit Score: This is a scoring model developed by Experian that is based on a variety of factors, including payment history, credit utilization, and business size. It has a scoring range of 1 to 100, with a higher score indicating a better creditworthiness.
Equifax Business Credit Risk and Business Failure scores: These are two scoring models developed by Equifax that are based on a variety of factors, including payment history, credit utilization, and business size. The Business Credit Risk score has a scoring range of 1 to 100, with a higher score indicating a better creditworthiness. The Business Failure score has a scoring range of 1 to 1000, with a higher score indicating a lower risk of business failure.
Where can you go to find and monitor your credit scores?
SIGN UP FOR THE CREDIT MONITORING SERVICES!
PERSONAL CREDIT
https://www.equifax.com/personal/
BUSINESS CREDIT
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