American Debt Solutions
American Debt Solutions is a 501(c)(3) Not-For-Profit Organization dedicated to
providing a debt free future for our customers
How Your Bank Measures Your Credit Score
How Your Bank Measures Your
Table of Contents
Why is your credit score important to you?
How is your credit score determined
Learning about your credit report
The benefits of a consumer credit
Why is Your Credit Score Important
Total interest charges
Mortgage interest rate
Assumes a $100,000 thirty year, fixed rate mortgage.
Your Classic “Catch-22”
Because you have a lower credit score, you
must pay more for credit. Because you pay
more for credit, you have higher monthly
payments than you would have otherwise.
Because you have higher monthly payments
on items like your mortgage, you cannot
afford to pay down or pay off your unsecured
consumer credit (i.e.: your credit cards).
Because you cannot pay off your credit cards,
your credit score gets worse and worse.
How Your Credit Score is
Payment history – 35% of your credit score
– How many unpaid bills do you have
– Have any of your bills been sent to collection
– Have you declared bankruptcy
– The more recent the problem, the greater its impact will be on your credit score
Outstanding debt – 30% of your credit score
– Are your credit cards at or beyond their limit
– We recommend that you keep your credit card balances at or below 30% of your
credit limit on the cards
Length of credit history – 15% of your credit score
– The longer your credit cards have been open, the higher will be your credit score.
Banks want to see a strong track record of success
Recent inquires – 10% of your credit score
– Each time you apply for credit, a note is made on your credit report.
– The more recent inquiries, the lower will be your credit score