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3 Major Factors of Your Credit Score

Improve your credit score Your credit score is based on many things, but there are three common factors that make up about 80% of your score.  Many financial institutions start with your FICO score, which is based on a system developed by the Fair Isaac Company to determine a numeric value based on your previous and ongoing credit transactions. Although many financial companies then apply some individual factors, your FICO score is often the beginning score.  Then, the following three factors shape your score:

Payment History:

This is information from any creditor on payments made.  This could be your Mortgage company, your bank, a department store or a cell phone company.  Any payment you make (and when you make it) gets reported to the credit bureaus.  It is always important to check your report often because some companies may not be reporting positive history information.

Amount of Used Available Credit:
Creditors want to see that you aren't using all of the credit given to you. This  may include a car payment, mortgage AND credit cards.  If you have a car payment, mortgage and maxed out all your credit cards, lenders will not feel comfortable loaning more to you.  This is why when your cards are paid down, your score often moves up.

Length of Credit History:

You may think that someone with no debt at all would have a better score than someone with a lot of debt.  It's just not true since they have no history to review. In order to receive a good score you need to have at least some prior transactions to be used to calculate your record of payments.

Although filing Chapter 7 or Chapter 13 Bankruptcy may have a negative impact on your score, it will bounce back soon after if you keep these three factors in mind.

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