How Are Credit Scores Calculated Part 3 of 6


When it comes to revolving credit cards, the formula looks at the difference between the high limit and the balance. Let’s say you have a MasterCard with a credit limit with $10,000 and you have a balance of $2,000 on it. That is a 20% utilization ratio. That is good. The lower the ratio, the higher the credit score. If you are looking for a quick credit score boost, pay down the balance on any accounts that you can.The score will not change instantly. It may take up to 45 days for the credit bureaus to update reports.

It is important to remember CLOSED ACCOUNTS do not help and can hurt if there is a balance remaining. Closed revolving accounts remove available credit and raise the utilization ratio – that is not good.

Part 4 of 6 will follow in the near future

Contact us: Bill Spragg at , 281 804 3333 or Harry Bradley at , 713 419 7151


How Are Credit Scores Calculated Part 2 Of 6

How Much Is Owed:

The credit bureaus look at the total amount owed on all accounts compared to the total credit limit as well as how much you owe on different types of accounts (mortgage, auto, etc.). Using a higher percentage of the credit limit will cause concern with the lender / creditor and hurt your credit score. Individuals who max out their credit limits have a much greater risk of default.

For good measure, try to keep revolving credit balances at 30% or less of the credit limit. This will boost scores. Let’s say the balance on a revolving account has reached 79% of the credit limit and you have never missed a payment. The bureau computers will read this account as “Maxed Out” and your score will drop. Paying down the balance will cause the score to improve.

Part 3 of 6 will follow in the near future

For questions, contact Bill Spragg at , 281 804 3333 or Harry Bradley at , 713 419 7151


How Are Credit Scores Calculated? – Part 1 of 6

Fair Isaac (FICO) and Vantage Scores keep their formulas a closely guarded secret. This can be very frustrating for consumers when they see comments on their credit report like “to many revolving debt accounts” and not know exactly what that means.

Payment History Р1 of 5 categories that determine a credit score

35% of a credit score is determined by payment history. This is because lenders want to know a person’s payment history – past and present. This category can be broken down into 3 subcategories:

  1. Recency – This is the last time a payment was late. The more time that passes, the better.
  2. Frequency – One (1) late payment looks much better than a dozen (12).
  3. Severity – The “Hierarchy of Madness” so to speak, rest on the logic that a payment 30 days late is not a serious as a payment 60 or 120 days late. Collections, tax liens and bankruptcies are credit score killers.

Part 2 through 6 will follow in the near future.

For questions, contact Bill Spragg, , 281 804 3333 or Harry Bradley, , 713 419 7151

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