⇒ Payment History (35% of the credit score’s weight)

1) The fewer lates, judgments, liens or collections, the better.

2) Recent derogatory items are more indicative of future default than those that occurred more than 24 months ago.

3) The severity of a delinquency (how far past due) will impact the score.

⇒ Amounts Owed (30% of the credit score’s weight)

1) Low balances on several credit cards are better than high balances on a few cards. Balances on your cards should be kept below 50% of the credit limit. Keep balances as close to zero as possible for optimal score.
2) Too or many credit cards can be detrimental. WARNING: DO NOT CLOSE ANY OF YOUR ACCOUNTS WITHOUT FIRST DISCUSSING YOUR COMPLETE CREDIT PROFILE WITH YOUR MORTGAGE PROFESSIONAL. YOUR SCORE COULD GO DOWN!!

⇒ Length of Credit History (15% of the credit score’s weight)

1) The longer accounts have been opened, the lower the risk indications are about you.

2) Opening new accounts and closing your seasoned accounts will negatively impact your score. AVOID “credit surfing.”

3) There must be accounts with recent activity in order to get a credit score.

⇒ Types of Credit in Use (10% of the credit score’s weight)

1) Finance company accounts will score lower than the accounts you secure through banks or department stores. (Appears that you could not qualify for a better type of credit)

2) “90 days same as cash” and deferred payments generally are funded by finance companies.

⇒ New Credit (10% of the credit score’s weight)

1) Looking for new credit can indicate higher risk...

2) Multiple inquiries, regardless of the number, for mortgages, in a 14-day period of time, only have the impact of a single inquiry.

3) Promotional or administrative inquiries shown on your consumer credit report DO NOT adversely impact your score. Only authorized inquiries will impact your score.

WHAT DATA DO SCORES CONSIDER?

Scoring Models DO NOT Consider - Race, gender, religion, marital status, income, nationality, neighborhood, employment history, position or title, sexual preference, or interest rate being charged on a particular card. Scoring Models DO Include - ALL the credit information stored in the repository’s credit file on you at the time of the request, NOT just the negative credit information.

HOW DOES CREDIT SCORING HELP YOU?
Credit scoring is not a crystal ball, but it offers real benefits to both lenders and consumers:

1) People get loans faster – Scores are delivered instantly and credit decisions are sometimes made within minutes.

2) Credit decisions are fairer – Scores are completely objective. They can’t consider factors such as gender and race.

3) Scoring speeds up credit decisions. Lenders can make decisions more rapidly, and often with less documentation.

4) Credit mistakes can’t last forever. With scoring, past credit problems count against you much less.

5) Scoring helps make more credit available. Lenders using scoring can approve more loans and offer a wider variety of options based on risk level.

Source: www.swcsi.com