Question:

What consumer information to calculate credit score is used by the credit bureaus?

Answer:

The credit bureaus use a lot of information to calculate credit score for consumers. Here is what exactly is reported to Equifax, Experian and TransUnion - the major US credit reporting agencies - and how it is weighed to form the credit scores.

Information Used for Credit Score Calculation

  1. Payment History - items under this section have a weight of 35%. Recent payment history (last 12 months) has the greatest weight.
    • Credit cards, rent, mortgage or car loan payments;
    • Bankruptcies, foreclosures, tax liens and judgments.
  2. Credit balance - this item has weight of 30%. It refers to debt to credit balance - that is, having maxed out credit cards is bad. Having many credit cards with little debt is better than having 2 or 3 close to the limit. Paying off credit card debt to go down and stay below half the limit is important for your score.
  3. Credit history length - 15%. The longer the history, the higher score is calculated.
  4. New credit and types of credit for 10% each.
    • Too many simultaneously pulled out credit reports would reduce your score as they signify you are shopping for too much new credit. Too many credit cards or newly opened accounts also affect negatively credit score calculation.
    • In general, you need secured and unsecured debt to score high on credit types. That is, you need to pay for a mortgage and not rent to maximize your credit score in this section.

Personal Information Not in Use for Calculating FICO Score

  • Employment history and marital status;
  • Soft credit score pulls (made by you, or your employer and lenders without your consent);
  • Age;
  • Current address where you reside;
  • If you are on a social benefit program.
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