This is copied from the Central Ohio Credit Union Website - Hope you find it useful
Understanding & Improving Your Credit Score
Components of a Credit Score
- 35% = based on payment history (i.e. on-time pays or delinquencies and more weight is put on current pay history)
- 30% = capacity
- 15% = length of credit
- 10% = accumulation of debt in the last 12 - 18 months (# of inquiries & opening dates)
- 10% = credit mix (installment raises scores, revolving lowers score and the number of finance companies lower the score as well)
Approximate Credit Weight Each Year
- 40% = current to 12 months
- 30% = 13 - 24 months
- 20% = 25 - 36 months
- 10% = 37+ months
What actions hurt a score?
- Missing payments (regardless of the dollar amount, it will take 24 months to restore credit with one late payment)
- Credit cards at capacity (i.e. maxing out credit cards)
- Closing credit cards out (this lowers available capacity)
- Shopping for credit excessively (auto & mortgage shopping do not have a negative effect)
- Opening up numerous trades in a short period of time
- Having more revolving loans in relation to installment loans
- Borrowing from finance companies
What will improve a score?
- Paying down on credit cards
- Not closing credit cards
- Continue to make payments on time (older late payments will become less significant over time)
- Slow down on opening new accounts
- Acquire a solid credit history with years of experience
- Moving revolving debt to installment debt
What doesn't affect the score?
- Debt ratio
- Income
- Length of residence
- Length of employment
Scoring "Cheat Sheet"
- Almost impossible to score 700+ points with any current delinquency
- Almost impossible to score 700+ points without good capacity
- Will always score 700+ with good capacity and no public records, current or past delinquencies
- Will always score 500 point range or lower with no capacity and current delinquencies
- Will score 600 range if doing well with how you pay and okay in capacity
- Will score 600 range if doing well with capacity and okay in how you pay
Impact of Bankruptcy
730 Score (at time of Bankruptcy) = Loss of 200 points = 530
560 Score (at time of Bankruptcy) = Loss of 30 points = 530
