How Are Credit-Score Points Earned?
The official FICO scoring model runs from 300 to 850 points. But your score will very based on the type of credit you are applying for. There are differing score-models for each type of inquiry:
(in order of risk preference)
- Credit request for a mortgage – BEST
- Credit request for a car loan
- Credit request for a credit card account
- Credit request for a store credit card or consumer loan – Worst
Mortgage and Auto Loans are considered more positive because the debt they create will reduce as monthly payments are applied.
Credit requests for credit card loans usually hit the scores the hardest. This is because the debt balance is expected to go up every month until there is enough account history to show otherwise.
Once a negative condition hits your credit report, the damage is done. Paying a collection account will not regain the points you have lost.
Credit Score Breakdown
65% is tied to 2 things
- Payment History
- Credit Utilization
- The amount of money you are borrowing and whether you are paying your creditors back is the primary source of high credit scores
15% is tied to the amount of time you’ve had credit in your name
- The more time you have spent managing good credit the higher your score will be
- First time borrowers bring an added layer of risk
10% is scored on the type of credit used
- Auto loans and mortgage loans are scored as a positive.
- Credit Cards are negative.
- Pay Day loans almost ensure credit score deficiency.
10% is scored on a category deemed “new credit”
- This is an assessment of the most recently opened accounts and the types of credit that have been applied for.
- It also scores on how long it has been since you opened an account.
- At the maximum this category is worth 85 points to your FICO.
A mortgage credit inquiry will lower your credit score by 5 points. You can have as many mortgage credit score inquiries as you want for 14 days and you will only receive one reduction for 5 points.