Credit Essay

658 words - 3 pages

In my research I found that three companies are used in the United States as the primary determiners for credit score. The companies that determine credit score are Experian, TransUnion, and Equifax. The components I discovered that make up your personal credit score are: Payment History, Lines of New Credit, How much you owe, and finally length of credit history with other factors as well rounding out the table.
Payment history makes up the largest percentage at Thirty-Five percent. They use your past behavior in determining what you will do in the future. This is considered the most important factor in calculating credit scores because if they do not have data to show how you have performed in the past that might be misleading and could lead to someone with terrible credit in the past to open many new credit cards. They take into account the two types of loans, revolving and installment. Revolving loans are the types that always fluctuate, like opening new charge card accounts. Installments are paid back in portions like if you have payments to make on a car lease or mortgaging a home. If you default on a loan it is not always going to result in identical damage to your credit score. The amount of damage to defaulting is determined by the size of the installment. If you are working on boosting your credit to a higher rating, you should always pay on or by the due date.
The second biggest component to a credit score is the debt amounts. Debt amounts makes up around Thirty percent of the credit score determination and it basically is how much you owe. A credit company is not going to be very excited to loan you money if you are in debt over large sums to multiple parties. This debt amount is heavily concerned with the area of revolving credit. As I mentioned before, opening too many revolving forms of credit like charge...

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