Question:

Are there any secret credit rating criteria that are not publicly announced but take part in credit score estimation?

Answer:

Probably "secret" would not be the most appropriate word, but having in mind that the formulas of all three major credit rating agencies for calculating the credit score are proprietary - yes, credit rating criteria are not entirely clear.

What is known is that the credit rating criteria considers the following factors in order to assess a person's credit rating:

  • Payment history (about 35 percent of your credit score is based on this factor) - No wonder this is the most important factor; after all, this is why your lender wants to see your credit score in the first place - to see your past payment punctuality.
  • Outstanding debt (about 30 percent of your credit score is based on this factor) - the golden rule here is to keep your credit card balances at about 25% or less of their limits.
  • Length of credit history (about 15 percent of your credit score is based on this factor) - the longer you have had credit history and kept it clean, the better.
  • New credit (about 10 percent of your credit score is based on this factor) - opening new credit accounts can harm your credit score for a short period of time.
  • Types of credit (about 10 percent of your credit score is based on this factor) - it helps if you can show that you can manage successfully different types of credit accounts (for example credit cards, personal loans, mortgage loans).

Some Little Known or Ignored Credit Rating Factors

Have all those discounts during the last Christmas shopping spree managed to lure you? If you are one of the many who have opened many retail credit card accounts just to take advantage of the offered discounts on the purchases, then next time you should know better. Don't be mistaken that as long as you pay your bills on time you are safe. You credit score will be negatively affected by the opening of several new credit accounts in such a short time.

Have you been tempted to dump the account you have used for many years and become an authorized user of another one (for example your spouse's account) with better terms? Well, this would be a mistake.  Having a long credit history is an important factor for your good credit score.

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