The Credit Mystery Resolved

Real Estate Broker/Owner with Premier Realty Exclusive MO license #2005035566

In my experience, there appears to be a great deal of confusion about what makes up a persons credit score and what affects it the most. 

In the insurance business, as an employer, as a landlord, and in real estate (indirectly) I am involved in discussing credit scores with the public.  I've had people tell me their credit is bad and it turns out reasonably good, and I've had people tell me their credit is "ok" only to find that it is horrible. 

Credit scores are calculated from all the data in your credit report. This data can be grouped into five categories as outlined below. The percentages in the chart reflect how important each of the categories is in determining your (mortgage) credit score.  Different uses for credit reports, such as employment or insurnance generally weigh criteria differently.

These percentages are based on the importance of the five categories for the general population. For particular groups - for example, people who have not been using credit long - the importance of these categories may be somewhat different.

Payment History

  • Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.)

         Negative public records (bankruptcy, judgements, suits, liens, wage attachments,                      collection items, and/or delinquency (past due items)

  • Severity of delinquency (how long past due)
  • Amount past due on delinquent accounts or collection items
  • Time since (recency of) past due items (delinquency), adverse public records (if any), or collection items (if any)
  • Number of past due items on file
  • Number of accounts paid as agreed

Amounts Owed

  • Amount owing on accounts
  • Amount owing on specific types of accounts
  • Lack of a specific type of balance, in some cases
  • Number of accounts with balances
  • Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)
  • Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)

Length of Credit History

  • Time since accounts opened
  • Time since accounts opened, by specific type of account
  • Time since account activity

New Credit

  • Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account
  • Number of recent credit inquiries
  • Time since recent account opening(s), by type of account
  • Time since credit inquiry(s)
  • Re-establishment of positive credit history following past payment problems

Types of Credit Used

  • Number of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)  "Good" Credit, such as mortgages help build your score, whereas "bad" credit such as excessive credit cards or payday loans may detract from your score.

 republished from






Comments (2)

Jeffrey Smith
Author of 'Realtors Guide To Short Sale Success - Eustis, FL
Short Sale Education

Thanks for the input Chris. Helpful, concise, and informative.

Mar 08, 2010 02:19 AM
the Chris & Lisa Grus Team
Premier Realty Exclusive - Saint Louis, MO

Thanks for the kudos Jeffrey.  Credit ratings and Google rankings have always had the same mystery.  Hopefully consumers can at least get a better idea on how to improve credit on an ongoing basis rather than waiting until after the damage is done.

Mar 09, 2010 02:02 AM