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Understanding Credit Scores
Credit scoring is not as complicated as some may think. There are some basic rules, in developing scorecards. Credit data is gathered and mathematical methods are used to determine our score. Below is a breakdown on credit scoring. The two most important factors in determining credit scores are:
- Payment of debts late or failure to pay at all
- Extensive use and high credit card balances.
| A |
Pattern of Credit Use: About 10% of your score.
How many new accounts you have. The score looks at how many new accounts there are by type of account (for example, how many newly opened credit cards you have). It also may look at how many of your accounts are new accounts. |
| B |
Amounts Owed: About 30% of your score.
The amount owed on all accounts. Note that even if you pay off your credit cards in full every month, your credit report may show a balance on those cards. The total balance on your last statement is generally the amount that will show in your credit report. |
| C |
Payment History: Approximately 35% of your score.
Payment information on many types of accounts.
These will include credit cards (such as Visa, MasterCard, American Express and Discover), retail accounts (credit from stores where you do business, such as department store credit cards), installment loans (loans where you make regular payments, such as car loans), finance company accounts and mortgage loans. |
| D |
Length of Credit History: About 15% of your score.
How long your credit accounts have been established, in general. The score considers both the age of your oldest account and an average age of all your accounts. |
| E |
Types of Credit in Use: About 10% of your score.
What kinds of credit accounts you have, and how many of each. The score is a complex formula that takes into account both the types of account, their mix and the total number of credit accounts you have under your name. |
Credit Score Guidelines
650 and Above
In general, a score of 650 or above indicates a very good credit history. People with these scores will usually find the loan process quick and easy, and will have a good chance to obtain a loan at a relatively low rate of interest.
620 to 650
Scores between 620 and 650 indicate basically good credit. (Average FICO scores fall into this range.) People with scores in this range have a good chance at a loan at a good rate, but may have to provide additional documentation and explanations to the lender before the loan is approved.
Below 620
A score below 620 may prevent a borrower from getting the best interest rates, as they may be considered a greater credit risk-but it does not mean that mortgage funding can't be found.
CREDIT SCORE BREAKDOWN NATIONWIDE
This is why it is important to give Provident an opportunity to place you on our "Debt-Reduction Plan". We will personally customize a plan to help you get control of your finances.
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