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By: Caroline Cross

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Credit Score Breakdown: 5 Factors of a Healthy Score

Credit and Debt

Your credit score is a number, based on your credit report, that helps financial institutions determine if you will repay a loan. Credit scores can range from 300-850. Typically, the higher the credit score, the more likely the borrower will pay off their loan.


The Fair Isaac Corporation (FICO) is one of the most widely respected credit score providers used by banks and credit unions. FICO uses scores from each of the three largest credit bureaus—Equifax, TransUnion, and Experian—and determines your score by considering five factors: amounts owed, new credit, length of credit history, credit mix, and payment history (as shown in the illustration below).




What is your credit score breakdown?


Amounts Owed—How much debt do you have?

How you utilize your credit is an important factor in your FICO score. Having a high percentage of available credit shows you know how to manage your finances. This means keeping balances low on credit cards and paying down loans. If you have accounts open, with balances close to the limit, this implies that you are not able to handle another loan and could be a greater credit risk for your financial institution.    


New Credit—Do you keep opening new accounts?

Credit accounts that have been opened in the past 12 months are considered new credit. Each time you open an account, your credit is pulled, and a lot of credit inquiries in brief succession will lower your credit rating. This type of activity shows lenders that you could present a greater credit risk, especially if this is the beginning of your credit history. Applying for credit as you need it will help you appear to be a more responsible borrower.


Length of Credit History—How long have you been borrowing?

The longer you have a credit card account, the better your credit score. Having an account open for many years with a history of on-time payments will increase your credit score. When consolidating credit cards, consider keeping the account you’ve had the longest and discard the others.


Credit Mix—Do you have a healthy mix of credit accounts?

To improve your score, it’s important to have a mix of different credit accounts. A good mix of credit could mean that you have a credit card, car loan, line of credit, personal loan, and mortgage. It if is not attainable to have all those types of accounts, start with a few and take out new credit as you need it.


Payment History—Are you paying on time?

To maintain good credit, maintain a good payment history. If you pay your credit cards and loans on time each month you will develop a good payment history. Payments that are over 30 days old are considered late and will lower your credit rating.


 Want to know more? Download our eBook: 6 Tips for Improving Your Credit Score.




About Caroline Cross

Caroline Cross is a the branch lead at VSECU's Williston Branch. Her daily interactions with members can range from opening accounts to closing consumer loans. Caroline lives in Williston with her husband and two children.