July 1, 2020Understanding Your Credit Score

Most people believe if they make all of their credit cards, car loan, and mortgage payments on time, they can expect their credit score to be great. However, focusing on your payment history alone will not give you a complete breakdown of what actually goes into your credit score. Here are fivefactors that determine your credit score:  

Payment History: 35%

Lenders want to know that you are a reliable payer and you are making most of your payments in a timely manner. While a one-time late payment will have an impact on your payment history, if it is an unusual occurrence, it will not take long to regain your standing.  

Your payment history will comprise about 35% of your overall credit score. 

Amount Owed: 30%

Lenders get nervous when they see someone who has a high amount of debt. Typically, they will first review how much debt you have in relation to your total income. Then they review the different types of debt you have. They will also review how much of your available credit you’re utilizing.  

FYI: Secured debt is usually viewed more favorably than unsecured debt. Also, you should try not to use more than 25% of an open credit line.  

The amount you owe will account for about 30% of your credit score.  

Length of Established Credit: 15%

Well-established accounts benefit your credit score more than new accounts. Lenders tend to get nervous when someone suddenly starts applying for numerous loans or new credit cards. This category of your score usually increases as your credit accounts age provided you are making your payments on time.  

Overall, how long you have had credit lines will account for about 15% of your overall credit score. 

Types of Credit: 10%

Lenders will review your current mix of credit cards, installment loans, and mortgage loans. While it is not necessary to have all these different types of credit to raise your score, having more types of credit provides lenders with a better picture of your credit history. 

By demonstrating you’re able to responsibly manage different types of credit, lenders will view you as a lower risk than someone that has never had, for example, a credit card. The types of credit you maintain makes up about 10% of your credit score.

New Credit: 10%

It’s a common thought that checking your credit score or applying for loans will lower your credit score. However, if there is any impact on your credit score, it will be minimal. What lenders are concerned about is when you start applying for multiple loans or credit cards in a short period of time.  

It’s also important to not open many new accounts at once because it will lower the average age of your credit accounts, which affects your score.  

Overall, new credit accounts for about 10% of your credit score. 

Monitor Your Credit 

Members should be aware of all factors that can impact their credit score. It is also important to remember there is no “single” good credit score. Lenders may depend on numerous types of scoring to determine whether you qualify for different types of loans and each lender usually has their own tier when determining which scores they deem approvable 

Obtain your Free Credit Report at www.AnnualCreditReport.com to review your history and correct any mistakes or possible fraud.  

We’re Here to Help! 

If you have questions on your credit score or history or would like to discuss obtaining a loan, stop by or give us a call at 1-800-226-6673. 



Each individual’s financial situation is unique, and readers are encouraged to contact PEFCU when seeking financial advice on the products and services discussed. This article is for educational purposes only; It does not constitute legal advice. If such advice or a legal opinion is required, please consult with competent local counsel. 


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