In this post we are going to briefly explore and talk about how your credit score breaks down. For hard money lenders, your credit score did not typically make a very big difference. In the market today, on the other hand, much has changed, and even in the hard money realm, your credit is playing a larger role in lending decisions.
Many people are in the dark when it comes to the true facts surrounding their credit score and what it consists of. Here is a quick cheat sheet on credit score factors:
Thirtyfive percent of your credit score is derived from how you have made payments. This is the largest of your credit score, and the newest reporting carries the most weight. The items that fall under this general category include
- Foreclosures
- Tax Liens
- Judgements
- Collections
30% of your credit score is based on your accounts owed. Credit cards, mortgage loans, car loans, equity lines of credit and also other debts all factor into this part of your credit score.
15% of your credit score is a result of how long your credit history is, how long your various credit cards and other loans have been open in other words.
10% comes from recent activity. Having your credit pulled falls under this section.
Finally, the last 10% comes from the type of credit that you have used.
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