Karen Arbutine & Associates

Credit Scoring Advice

Mon, Dec 14, 2009 at 5:10PM

The following is a list of quick tips on credit scoring:

Payment History:  Credit scoring considers whether the borrower's payments are satisfactory, delinquent or derogatory.  Late payments have the highest impact on your borrower's credit score.

Utilization:  The percentage of the credit that the borrower uses on their accounts, in relationship to the overall availabe credit balances is an indicator of credit risk.

Balances:  The amount of recently reported balances, both current and delinquent, also, balances that have increased recently can be an indicator of credit risk.

Depth of Credit:  The length of the borrower's credit history and the types of credit provides greater insight into how the borrower manages credit.  A mixture of various types of credit (e.g. auto loans, installment loans, revolving accounts) can have a positive affect on their credit score.

Recent Credit:  The number of recently opened credit accounts and credit inquiries or taking on new debt can be an indicator of credit risk.

Available Credit:  Low balances on the borrower's credit is an indicator of good credit management and a low lending risk.  High balances on accounts can indicate potential over usage, which can negatively affect the credit score.

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