Home & Family
The average credit score of Alabamians is 691, while the United States national average is 714. A credit score impacts financial access, insurance, employment, utilities, and housing options. It is wise to take the time and effort to know your credit score and learn what is affecting the numbers.
Credit Score Number
There are 5 things that may affect a credit score number.
Payment History- 35%
A history of on-time payments is the most important factor in a credit score. Missing payments have a significant impact. Payment history accounts for 35% of a FICO score and credit score and it is used by 90% of top lenders.
Amounts Owed- 30%
Credit usage or utilization shows how much of available credit limit amount a person is using. Utilization ratio is calculated by taking the sum of all unpaid credit account balances and dividing by sum of all credit account limits. This accounts for 30% of a FICO score.
Credit History Length- 15%
How long someone has had credit, and how long they’d had a particular account matter. The longer someone has a credit account, the older the account gets, and the better the credit score. Credit history accounts for 15% of a FICO score.
Credit Mix- 10%
It is good to have diverse types of credit accounts. Installment and revolving credit are the two types of credit. Installment credit accounts are those with fixed payment series and due dates, like mortgage, student or auto loan. Revolving credit do not have fixed due dates, but usually has a minimum payment amount, like a credit card or home equity line of credit LHELOC). . Mix accounts for 10% of a FICO score.
New Credit- 10%
The number of recently opened credit accounts can impact credit score because it can affect the average age of account history and amount of credit utilization. Hard inquiries, when a lender pulls credit during a loan application process, may also impact a credit score. These actions account for 10% of a FICO score.
To learn more about credit, including how to monitor and repair credit contact your local Extension office and ask about Financial Resource Management programs or visit www.aces.edu.