Your Credit Score: Facts, Tips and Explanations

There is so much misinformation out there about how your credit works.  Let me dispel the myths right now with the exact information right from Fair Isaac, the creator of the FICO scoring system that is in widespread use.  Your credit score is made up of five factors:

  1. The length of your credit history makes up 15% of your score.  In other words, how long have you had things like credit cards, home loans, and auto loans.  The longer the better.  DO NOT under any circumstances close old unused accounts simply to clean up your credit report.  This will hurt your credit!
  2. Obtaining new credit accounts for 10% of your score.   When someone starts to apply and get approved for numerous credit accounts, lenders worry about over extension.  They see this by looking at the number of “hard” inquiries on your bureau reports.  Each hard inquiry can take 2-5 points away from your score and remain on your report for as long as two years.