Credit Score

Understanding how credit scoring works can help in managing debt effectively. Following a few simple steps and learning these scoring factors will improve your result.

Your Credit Score

Obtaining Your Credit Report

The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer credit reporting agencies—Equifax, Experian, and TransUnion to provide you with a free credit report, upon your request, once every 12 months. Equifax, Experian, and TransUnion use one web site, one toll-free number, and one mailing address. This combined information resource lets you order a free annual report. This report does not contain a credit score but provides a detailed summary of your credit history. To order your free annual credit report online, visit: or call toll-free: (877) 322-8228.

Several options are available when ordering your free credit report; you may wish to order your annual reports from each of the consumer reporting agencies at the same time, or you could stagger your order throughout the year, providing you with a periodic look at your credit status. In obtaining your report, you will need to provide your name, address, Social Security number, and date of birth. If you have moved in the last two years, you will be required to give your previous address as well. In order to maintain the security of your credit file, each reporting agency will ask for information that only you would know. It is important to note that the content of your files will vary as each reporting agency pulls its data from different sources.

FICO Score

Understanding FICO Score

In learning how scores are calculated, we will review the FICO Beacon score, as well as the factors that are used to calculate your credit score. Visit for more information.

Payment History 35%:

  • Includes a record of your history with various financial institutions: finance companies, retail cards, and credit cards, such as Discover or Visa, and installment loans.
  • Public record and collection items—reports of events such as bankruptcies, foreclosures, suits, liens, wage attachments, and judgments.
  • Details on late or missed payments (delinquencies) and public record and collection items such as collection accounts, charged-off accounts, or debt settlement.
  • Number of accounts showing no late payments.
  • Recent negative information will significantly lower your score; minimum of 2 years of positive history to establish credit worthiness.

Outstanding Debts 30%

  • The amount owed on all accounts; the total balance on your last statement is generally the amount that will show in your credit report.
  • The amount owed on all accounts and on different types of accounts. FICO considers the amount you owe on specific types of accounts such as credit cards and installment loans.
  • Whether you are showing a balance on certain types of accounts; balances should be under 30%.
  • How many accounts have balances: a large number can indicate higher risk of overextension.
  • How much of the total credit line is being used on credit card accounts: high balances (or cards close to “maxing out”) indicate an increased potential for risk and lower your score.

Length of Credit History 15%

How long credit accounts have been established; accounts that are older than seven years are favorable and raise your score.

  • How long specific credit accounts have been established. New accounts temporarily lower your score. Accounts that are open for one year are positive.
  • How long it has been since you used certain accounts. Regular credit activity is important.

Inquiries 10%

  • Too many new accounts. Recently opened credit cards may have a negative impact on your score.
  • Length of time since you opened a new account.
  • How many recent requests for credit you have made, as indicated by inquiries to the credit bureaus. More than four within a three-month period may lower your score.
  • Length of time since credit inquiries have been made by lenders.

Types of Credit 10%

  • What types of credit accounts you have, such as credit cards, retail cards, installment loans, or finance company loans. It is not necessary to have one of each. How many of each; FICO looks at the total number of accounts. One to three revolving accounts are optimal, but no more than seven are recommended.

Who Can View Your Credit Report

Federal law regulates who can view your credit report. Here’s a list of those who have access to your file.

  • Creditors who make credit inquiries, including home, personal, or installment loans.
  • Employers who evaluate you for hiring, promotions, or other employment purposes such as arrests, convictions, or court judgments.
  • Government agencies who may be trying to collect child support or if you apply for public assistance.
  • Landlords who are making leasing or rental decisions.
  • Insurance companies who are looking for medical information or previously filed insurance claims.

Understanding how credit scoring works can help in managing debt effectively. First, credit scoring is a numerical indicator used to predict risk. Lenders rely on credit scores to determine, based on a range of numbers, the borrower’s potential for credit risk, default, or delinquency. Interest rates and credit terms and conditions are adjusted accordingly. There are rewards for higher scores and penalties for lower scores. Those with higher scores qualify for easier access to credit, lower interest rates, and more financial options. Without question, you can raise or lower your score based on the decisions you make. For example, overextending your credit, obtaining personal loans, or accumulating debts will have a dramatic impact on your score. Remember, following a few simple steps and learning these scoring factors will improve your result.