Credit Score

Keeping on Top of Your Credit

Many people are aware that there are agencies that compile credit reports about them, but a lot of people don’t stay on top of what these reports contain. It really is important to get a copy of these reports periodically because they can contain errors that could adversely affect your credit score.


What the credit report does:

The credit report summarizes some information about you concerning how you have handled many of your payment responsibilities. Potential lenders have the opportunity to get these reports so they can use them to help determine whether you are someone they want to extend credit to.


What is the credit score?:

The credit score is a score that is derived at by looking at various components of information that the credit report itself possesses. Scores that in are the low 300’s are considered to be very bad. Scores that are up around 850 to 900 are very good. The scoring system will vary a little depending on the credit bureau producing the score. What the numbers mean really is if you have a score that is at 580 then it means 580 out of the 850/900 that you will be able to handle your debt.

To determine the credit score there are 5 factors that the credit report companies use to do this.


  1. Repayment History

35% of the score is comprised on this.

How you have handled your payments to your creditors is considered to be the more important part of your credit history. It shows how you have handled all your debts. It has become common place to now even see mortgage payments on these reports. You may not realize it but every payment you make to your creditors gets listed on your credit report. This includes payments like your credit cards, vehicle payments, loans, and even your cell phone payments. If you have not been in the habit of missing payments then you are going to get an excellent score in this segment of the report.


  1. What you owe

30% of the score is based on how much you owe.

Creditors who are considering extending credit to you want to know just how much you currently owe. They don’t want to make loans to people who are over extended with their debts. What they will look at is the balances on your credit cards or lines of credit. So if you have maxed out your cards then they may consider you to be a risk. If however, you still have a good credit balance on your cards or line of credit then the risk to loan money to you is lower.


  1. Credit history length

15% of your credit history length is used in the calculation

Creditors want to know how long you have been using credit. This history gives them a good indication of how credible you are for repayment of any loans they make to you. If you have a credit history of five years that shows you have no missed payments then this is going to be advantageous to you for your credit score. Individuals who have a short credit history will not have the same reflection in their score. Normally information about an individual’s credit cannot go back any further than 6 to 7 years. Ideally you want to keep your credit report current so using credit occasionally is important.


  1. Credit applications

10% of your credit applying information will be used to gather your score.

Every time your credit is checked it shows on your credit report. It contains information covering five years that includes…

  • The number of credit account you have opened
  • The amount of time that has lapsed since you opened new accounts
  • The date since your last credit inquiry

What will be evaluated s whether you are trying to re-establish your credit history because of previous payment issues.

When individuals have several credit applications on their credit report it is known as credit shopping. It can raise red flags for a potential lender. Lenders do not want borrowers to over extend themselves.


  1. Credit types

This will make up 10% of your score.

This doesn’t reflect too heavily on your score and is perhaps the least important. However, if there is not much other information on your report then this will hold more weight. The type of credit you have tells a story about how you handle money in general. An example would be if you have purchased items on payment plans then it may indicate you are not able to save for the purchases you want to make.

If you are having difficulties deciphering your credit report or understanding your score, our agents here at CVE Mortgage group would be glad to assist you with obtaining a better understanding of this.