How does one's "credit score" work?

Question

I'm only barley in highschool and whenever I ask my mom she doesn't explain it very easily so can someone specifically and easily explain how your credit works?

Answer 1

Credit scores are made up of the following factors;

1. Payment history 35%
2. Time in bureau 15%
3. Types of credit 10%
4. New credit 10%
5. Debt to credit ratio 15%

As you can see 1,2&5 are the most important as far as score goes but you need much more then a good score you also need a good profile.

This is achieved by having 3 credit card accounts (revolving) with balances below 30% of your credit limit and 2 cars, boats, furniture, homes or personal loans (installment) all with good long payment history's.

I look at credit every day and see people with 700 scores that can not buy a car due to their score being made up of 1 credit card with a $500.00 limit paid 15-timeas and a couple of student loans.

While this generates a great score, it doe's not actually show the ability or the willingness to pay anybody.

Answer 2

I always wondered the same thing and then I found a wonderful website with lots of great articles. They explain the whole thing very clearly. Go to www.1-800BadCredit.com (their home page) but the page for this is http://www.1-800badcredit.com/credit-score.html

Answer 3

Credit score numbers are misleading and arbitrary. For example, one credit bureau may rate you at 575, while another rates you at 650.

Answer 4

I suggest that you read this entry from Wikipedia:

http://en.wikipedia.org/wiki/Credit_score