The 5 Categories of Your Credit Score

Posted by : Cole Haynes

Your credit score is calculated by using lots of credit related information about you.

All of this information fits into one of five categories, each varies in overall importance when calculating your score.

The Five Categories:

5 categories of score


Considering the above breakdown of categories by importance, realize that Payment History and Amounts Owed carry significant importance when determining your credit score — about 2/3’s of your score!


How Do I Achieve a High Score?


Payment History:
Paying your bills on time every month–this makes up 35% of your credit score! If you have trouble remembering to pay your bill on time, take advantage of automatic payments or setup automatic reminders on your cell phone calendar.

Now, it’s important to understand that payment history is based on your credit related accounts, like credit cards, auto loans, mortgages, and personal loans you have. Other bills like your car insurance, cell phone, cable, and similar expenses do NOT appear on your credit report.

Amounts Owed:
The amount of credit you are currently using has a big impact on your credit score. Ideally, on your revolving credit accounts, like credit cards, your balances should be 30% or less of your total credit limit.

Length of History:
Your length of credit history shows your experience and should prove you are reliable as more time goes by. This is why it is important that you don’t close your credit accounts. When you close your credit account you are basically removing any length of history that particular account was providing you.

Types of Credit Used:
You are a better risk if you have experience using a different mix of credit successfully. Some examples of different types of credit include:

Revolving Credit: This type allows you to borrow up to a pre-established amount as often as you’d like, as long as your account is kept in good standing. So this includes credit cards, department store cards, gas cards, etc.

Installment Credit: This is the type used when purchasing your car or house. You borrow a specific amount of money and agree to make monthly payments(installments) for a specific amount of time, like 5 years.

Open Credit: This is the least common of the three types, open credit has no limit and you required to pay the balance in full each month. An example of this is an American Express card.

New Credit:
Makes up 10% of your score and it considers new credit accounts that you have opened or applied for, and how long it has been since you have opened a new account.

So if you have recently opened several accounts, this might represent a greater risk for giving you even more credit, especially if you have a short credit history.

If you have questions about your own credit reports and scores, contact us for a free consultation. ¬†One of our credit experts will help you understand where you stand currently, what’s helping you, what’s hurting you, and what Cake Credit can do to help you.