Asheville Nester, Laura Moye, asked business colleague and mortgage broker Cameron Lewis of Acopia Home Loans to share some advice on the five factors that influence your credit score…
The Five Factors of Credit Scoring
By Cameron Lewis
Credit scores are comprised of five factors. Points are awarded for each component, and a high score is most favorable. The factors are listed below in order of importance.
Payment History – 35% Impact
Paying off debts on time has the greatest positive impact on your credit score. Late payments, judgments and charge-offs all have a negative impact. Delinquencies that have occurred in the last two years carry more weight than older items.
Amounts Owed / Outstanding Credit Card Balances – 30% Impact
This factor marks the ratio between the amount owed and the remaining available credit. Ideally, the consumer should make an effort to keep balances as close to zero as possible, and definitely below 30 percent of the available credit limit.
New Credit Inquiries – 10% Impact
This percentage of the credit score quantifies the number of inquiries made on a consumer’s credit within a twelve-month period. Each new credit inquiry can deduct points from a credit score. Note that personal credit inquiries do not impact scores.
Length of Credit History – 15% Impact
This portion of the credit score indicates the length of time since a particular credit line was established. A seasoned borrower will always be stronger in this area.
Types of Credit Used- 10% Impact
A mix of credit, such as an auto loan and a credit card, is more positive than a concentration of debt from only credit cards.
NMLS #112509, Branch Manager
Sr. Mortgage Loan Officer
Acopia Home Loans
(828) 231-4909 Office
[email protected]
Thank you, Cameron, for the great information! To learn more about how your credit score can impact your home purchasing power, contact Laura Moye or your local Nest Broker.