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What is the math behind your credit score?

 

in Economics and Finance by Gold Status (10,269 points) | 464 views

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According to ClearScore, a South Africa credit services company, the breakdown is as follows:

Your credit score predicts the likeliness of you sticking to your debt obligations. It allows lenders to make informed decisions before approving your credit applications.

Improving your credit score is your responsibility. By understanding which factors influence it – and to what degree – you will be able to grow it steadily. 

This is how your credit score is weighted

$35 \%$ Payment history

This is the leading factor which determines your credit score. If you can prove that you diligently pay your accounts, then lenders will be confident in lending to you.


$30 \%$ Amounts owed

Your credit utilisation shows lenders whether you have maxed out your credit, or whether you're only borrowing up to $30 \%$ of your available credit. 


$15 \%$ Duration of credit history

Otherwise known as your "credit age", this shows lenders how long you have worked with credit. In this case, more experience will count in your favour. 


$10 \%$ New credit

If you opened a new credit card and applied for a personal loan at the same time, it may give lenders the impression that you're desperate. Keep your credit applications at least 6 months apart. 


$10 \%$ Types of credit

You may have demonstrated your maturity with short-term debt, but this is different to long-term debt. Lenders appreciate seeing you have experience with both. 

source: ClearScore

 

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