Score! - What Separates the Winning Credit Reports from the Losers
Contributed by Theresa Macdonald
Score! - What Separates the Winning Credit Reports from the Losers
Sure, you know that if you declare bankruptcy or never pay your credit card bills, your credit report won't look especially stellar. But do you realize that many other elements factor into how your credit report measures up? There are actually five basic categories that will determine whether your credit report will cause potential lenders to grin or to gag. Now pay attention, because there's much more to some of these categories than just timely bill paying.
Your Payment Past and Your Credit Report
Your payment timeliness contributes the most to your credit score, making up about 35 percent of it. Recent late payments score you lower than older ones. Also, many late payments on several accounts will deduct more points than tardy payments on a single credit line. And keep in mind, late payments and most other credit blemishes will stay on your credit report for seven years. (Bankruptcy follows you for ten.)
Your Outstanding Balances and Your Credit Report
This area of your credit report affects about 30 percent of your score. If your outstanding balances are inching toward the amount of available credit you have, that will impact your credit score (and not for the better). If you're maxed out on one or more lines of credit, that will cause more damage.
Even if you aren't close to reaching your limit on any of your accounts, lenders don't get too thrilled about a person who has tons of credit extended to him, if he doesn't have the income to back it up. Despite your history of responsibility that probably earned you such high credit lines to begin with, lenders might still view you as a liability.
