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Top 5 Factors that Affect Your Credit Score

Credit scores are calculated using a complex algorithm which takes into account dozens of different factors related to your credit history.

Many of these factors are not worth worrying over, so we're only going to focus on the top 5.

While the algorithm used to calculate credit scores is a closely guarded secret, we do know that the following 5 factors make up more than 90% of your overall credit score.

1. Payment History / Late Payments - 35%

Your payment history is the most important factor in determining your credit score. It makes up 35% of your score and includes all the payments you made on any type of loan such as credit cards, mortgages, and auto loans.

Any payments that were 30 days past due will affect your credit score, sometimes for up to 7 years. The more recent the delinquency, the more it will affect your score. The amount of the late payment is also a factor - if it was only $20, that will count less than if the late payment was for a $500 bill.

Presence of a bankruptcy or judgments against you will severely affect your credit score.

2. Amount Owed - 30%

The amount of credit you have available and the amount you use on a monthly basis can have a big influence in determining your credit score. Lenders like to see a wide variety of credit available with usage that is not excessive.

The number of accounts you have with balances on them is another factor that can play a big part.

3. Length of Credit History - 15%

The longer you've had credit available, the better. From the lender's perspective, someone who has never had to pay back a loan does not have a predictable credit risk.

People who have not missed any payments over a long time period benefit with a much better credit score.

4. Opening New Lines of Credit - 10%

The number of new credit accounts opened recently has an influence on your credit score.

If you start using a couple of new credit cards, lenders assume you're in need of money and that increases your credit risk.

5. Types of Credit Used - 10%

Having a blend of different types of credit (such as credit cards, auto loans, and mortgages) will result in a higher credit score.

My Recommendation for Car Shoppers

TrueCar No-Haggle and Edmunds Price Promise are the quickest way to see the lowest car prices in your area. These sites show you no-haggle prices from dealers closest to you - and the deals are usually really good. This should be the first step you take when negotiating your car price. Follow this up with my checklist to make sure you squeeze out every last bit of savings.
- Gregg Fidan

Gregg Fidan

About: Gregg Fidan


Gregg Fidan + is the founder of RealCarTips. After being ripped off on his first car purchase, he devoted several years to figuring out the best ways to avoid scams and negotiate the best car deals. He has written hundreds of articles on the subject of car buying and taught thousands of car shoppers how to get the best deals.

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