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15% of the score is based on the length of time

A credit score is a number that is calculated based on your credit history to give lenders a simpler “lend/don’t lend” answer for people who are applying for credit or loans.

you’ve had credit. The longer you’ve had established credit, the better it is for your overall credit score. Why? Because more information about your past payment history gives a

more accurate prediction of your future actions.

The system awards points based on information in the credit report, and the resulting score is compared to that of other consumers with similar profiles. With this information, lenders can predict how likely someone is to repay a loan and make payments on time.

Although there are several scoring methods, the score most commonly used by lenders is known as a FICO because of its origins with Fair Isaac and Company. Fair Isaac is an independent company that came up with the scoring method and software used by banks and lenders, insurers and other businesses. Each of the three major credit bureaus (Experian, Equifax and TransUnion) worked with Fair Isaac in the early 1980’s to come up with the scoring method.


10% of the score is based on the number of

inquiries on your report. If you’ve applied for a lot of credit cards or loans, you will have a lot of inquiries on your credit report. These are bad for your score because they indicate that you may be in some kind of financial trouble or may be taking on a lot of debt (even if you haven’t used the cards or gotten the loans). The more recent these inquiries are, the worse for your credit score. FICO scores only count inquiries

from the past year.


10% of the score is based on the types of credit

you currently have. The number of loans and available credit from credit cards you have makes a difference. These actually come more into play if there isn’t as much other information on your credit report on which to base the score.

The three national credit bureaus each have their own version of the FICO score with their own names. Each is based on the original Fair Isaac FICO scoring method and produces equivalent numerical results for any given credit report.


The number itself can range from 300 to 900. The formula for exactly how the score is calculated is proprietary information and owned by Fair Isaac. Here, however, is an approximate breakdown of how it is determined:

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35% of the score is based on your payment


history. The score is affected by how many bills have been paid late, how many were sent out for collection, any bankruptcies, etc. When these things happened also comes into play. The more recent, the worse it will be for your overall



30% of the score is based on outstanding debt.

How much do you owe on car or home loans? How many credit cards do you have that are at their credit limits? The more cards you have at their limits, the lower your score will


Did You Miss ? Part 1 - Identity Theft Explained and Part 2 - How do you lose your Identity?.

MANAGING THE RISK OF FRAUD has been prepared for the general information of our clients, staff and other interested parties. The enclosed comments are of a general nature and are not intended to cover all aspects of the subject matter. Prior to implementing any planning based upon information in this

publication, the specific facts pertaining to any particular situation should be carefully considered. We will be pleased to assist in this regard and to provide further details pertaining to the matters discussed herein.

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