Today we are going to take a brief look at what makes up your credit score. For many hard money lenders, what your credit was did not used to make much of a difference. In the market today, on the other hand, things have changed, and even in the hard money world, your individual credit is playing a larger role in lending decisions.
Most people are in the dark when it comes to knowing and understanding the makeup of their credit score. We have put together a basic cheat sheet on credit score factors:
Thirtyfive percent of your credit score comes from the history of your payments. This is the biggest of your credit score, and the newest payment history is weighted the most. The items that make up this category are
- Judgements
- Repossessions
- Late payments
- Foreclosures
The next largest chunk of your credit score comes from accounts owed. Credit cards, mortgage loans, car loans, equity lines of credit and also other debts all make a difference in this section.
15% of your credit score is a result of the length of credit history, how long your various credit cards and other loans have been open in other words.
Ten percent comes from recent activity. Having your credit run falls under this section.
Finally, the last ten percent comes from the kind of credit you use.