Credit score models used by businesses may vary and are usually complex. However, according to the Federal Trade Commission, credit scores can be affected by many factors, including the following:
- Your payment history is a common factor for either positive (e.g., a record of timely payments) or negative (e.g., a declared bankruptcy, late payments of bills, accounts referred to collection) treatment in determining credit score.
- Being “maxed out” on “the amount of debt you have compared to your credit limits” can result in negative impact to your credit score.
- The length of your credit experience can impact the score. For example, an insufficient credit history can have negative impact, but the FTC suggests this can be offset by factors like timely payments and low balances.
- The FTC indicates some models consider whether you have applied for credit recently. Applying for too many new accounts recently can impact a score negatively.
- The number of credit accounts you maintain can impact the score, too. Even though it is generally considered a plus to have established credit accounts, too many of them can be negative.
- There are other factors, as well, such as, for example, a prospective borrower’s loan payment, total debt on the anticipated mortgage and personal income.
For more information, see the FTC’s “Building a Better Credit Report” (available free online at www.consumer.ftc.gov/articles/pdf-0032-building-a-better-credit-report.pdf).