2. 5 Components of Credit Scoring
Timely
Payments
35%
Utilization
Ratio
30%
Inquires 10%
Length of
Credit
History
15%
Credit
Type of
Credit
10%
3. 1. Timely Payments
Timely
Payments
35%
Utilization
Ratio
30%
Inquires 10%
Length of
Credit
History
15%
Credit
Type of
Credit
10%
4. Timely Payments
• 35% of your overall credit score
• Late is 30 days after it’s due date
• The more recent the late payment, the
more it hurts you.
• It could drop your score as much as 100
points!
5. 2. Utilization Ratio
Timely
Payments
35%
Utilization
Ratio
30%
Inquires 10%
Length of
Credit
History
15%
Credit
Type of
Credit
10%
6. Utilization Ratio
• Pertains to cards that have a credit limit
• Makes up 30% of your score
• Ideally, never have a balance >25% of your
max credit limit
• The more you exceed this threshold, the more
negatively your score is impacted
• Calculated monthly at the statement ending
date
7. Tips for the Utilization Ratio
1
• Increase your credit limit to prevent
exceeding 25%
2
• Spread your spending over more cards
3
•Pay the bill before the statement ending
date
8. 3. Length of Credit History
Timely
Payments
35%
Utilization
Ratio
30%
Inquires 10%
Length of
Credit
History
15%
Credit
Type of
Credit
10%
9. Length of Credit History
• Contributes to 15% to your score
• Be very cautious about closing a line of credit
– It’s better to pay it off but keep it open
• Closing it would wipe out that entire history that
was built up
• Critical for those with thin credit histories or
young people just getting started
10. 4. Type of Credit
Timely
Payments
35%
Utilization
Ratio
30%
Length of
Credit
History
15%
Type of
Credit
10%
Credit
Inquires 10%
11. Types of Credit
• The combination of different types of credit
makes up 10% of your credit score
• Important to have major credit cards, ideally
2-3
• Stay away from Consumer Finance Accounts
o i.e. department store credit cards or interest free deals from
electronic or home furnishing stores
Home
Loans
Car Loans
Student
Loans
Credit
Cards
Good Credit Mixture
12. 5. Credit Inquiries
Timely
Payments
35%
Utilization
Ratio
30%
Inquiries 10%
Length of
Credit
History
15%
Credit
Type of
Credit
10%
13. Credit Inquiries
• Make up 10% of your score
• Always be mindful of who checks your
credit
• If shopping for mortgages or
automobiles, most scoring models only
count one inquiry against you as long as
they are within a 30 day period
14. Credit Basics brought to you by:
1640 Powers Ferry Road, B4 S100
Marietta, GA 30067
678-483-3300 | www.familyga.com
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This presentation is for educational purposes only
