One of the most important factors in whether a lender will approve your application for a loan is your credit score. Knowing how your score is calculated can help you maximize your chances of being approved for loans or having access to other types of credit.
The Facts
Credit bureaus calculate your credit score using information found in your credit report, such as your credit history, the types of credit you have and how much you owe.
Misconceptions
Even though personal and employment information is included in your credit report, they have no affect on your credit score.
Factors
The credit scoring model assigns different weights to different factors: 35 percent of your score is determined by your payment history; 30 percent by your outstanding balances; 15 percent by how long you've been using credit; and 10 percent each by your applications for new credit and the types of credit you've used.
Time Frame
Your credit score takes into consideration your financial history from the past seven years, with a few exceptions. A Chapter 7 bankruptcy filing will affect your credit score for 10 years, while inquiries remain only for two years.
Considerations
Each credit bureau collects your credit information independently, so some information may be found on one credit report but not others, which can lead to different credit scores.
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