Debunking credit score mythsYour credit score has nothing to do with your age, gender or career.

Yet nearly 60% of those who responded to a recent survey believe that employment history is a factor to nudging up a credit score. Another 39% of 1,006 people asked by Visa Inc. thought age played a role, while more than one fifth of people surveyed believed that the ability to speak English and national origin were factors.

Loan applications, which do ask personal background questions about date of birth and gender, are invariably linked to credit reports in consumers' minds because they are often used together by lenders to make a decision.

This is entirely separate from the information used to build a credit score, which instead relies on transactional information about how a borrower has managed his or her bills and credit lines.

A good or bad credit score plays a major role in financial, housing and employment opportunities but less than half of Americans regularly check their score, the Visa survey reported. Americans are entitled to a free report from each of three national agencies at Remember that there is no one score; all three credit reporting agencies may use different scoring formulas, including popular ones such as FICO and VantageScore, and it is advisable to get all three reports.

There are five basic components that credit rating companies use to determine a score, and each piece is given a different approximate weight, according to Atlanta-based non-profit credit counseling group, CredAbility.

1. Payment history makes up 35% of a credit score. This includes the overall record of payment to all lenders and billing organizations. The occasional late payment on a bill will derail a credit score, but credit companies do consider the overall history of paying bills on time.

2. Total amount owed and debt-to-income ratio account for 30%. Lenders and credit companies look at the total number of accounts, credit limit and how much of a credit line is being used. If lenders see high balances across multiple accounts, they may view that as a signal that a borrower is overextended. They also look at how much is owed on installment loans.

3. Credit history length makes up another 15%. In general, the longer a borrower has used credit responsibly the higher the credit rating. However, new borrowers with only one or two well-managed traditional accounts can still have a high score.

4. Opening new lines of credit can affect 10%. Credit score companies consider how many new accounts a borrower is applying. Opening several credit accounts in a short period of time represents a higher risk, especially for people without long established credit histories.

5. The mix of credit types makes up 10%. Credit types can range from a mortgage, to auto loans and other installment loans, retail accounts and finance company accounts. Responsible management of loans is more important than types of credit.

"Paying bills on time is the number one thing [consumers can do] to reshape credit," says Mechel Glass, CredAbility's director of education. "Limit the credit you are trying to go after and take the time to improve credit before trying to get a loan."

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When two persons marry, if one has good credit and the other has a defaulted student loan and other debts, does this taint the good credit at some point and how could this be avoided until the defaults and bad debt is cleared up? Thankyou.

December 12 2011 at 1:29 AM Report abuse rate up rate down Reply

I'll do without a 'I Love Debt' score, thanks. I'll be very happy when my score gets as close to 0 as possible.

October 13 2011 at 10:27 PM Report abuse rate up rate down Reply

If you don't pay your credit cards bills you are simply ripping off the banks that were ripping you off in the first place. These companies are a pariah on our system. How much your auto insurance will cost, depending on your credit report, is a ridiculous factor and should not even be permitted by law. There must be a ton of people with bad credit now, which means that where credit was primarily the rich financing the poor, now the rich will have nobody to finance except themselves.

October 13 2011 at 7:11 PM Report abuse rate up rate down Reply
Louise & Dennis

We just received our car insurance invoice and noticed a $200-plus increase from last year. The reason given is that we have a high percentage owed on our auto loans (we lease our auto and have been doing so for over 20 years with never a missed payment). The second reason given is that we have a high proportion of open bankcard accounts to open revolving accounts Again, we never carry a balance and pay off our credit card as soon as the invoice arrives. We currently use only two bank cards (although we have three that we never use) and have three revolving credit cards which we seldom use. All card balances are paid off as invoices are received. They tell us not to close credit card accounts because it reflects badly on your credit. So, we are damned if we do and apparently damed if we don't! Is the insurance company correct in citing these two reasons for an increase?

October 13 2011 at 3:17 PM Report abuse -1 rate up rate down Reply
1 reply to Louise & Dennis's comment

Dont be stupid and lease a car would be my advice. That's the worse possible way to have a car.

October 13 2011 at 10:30 PM Report abuse rate up rate down Reply

If a credit score relies on the length of credit history a customer has (point #3), then it's inherently linked to age as well. A 59 year old will necessarily have a longer history than a 19 year old...

October 13 2011 at 1:50 PM Report abuse rate up rate down Reply

What credit scores don't include is a person's saving habits. How much is in the bank? Granted many people have a hard time saving these days, and as a nation we are one of the lowest industrialized nations as far as being savers, but it says alot if someone diligently stashes money in an account - at any age and in any phase of their work life.
This should be rewarded just like a missed payment is a penalty.

October 13 2011 at 1:37 PM Report abuse rate up rate down Reply

how do you credit scores when tax lien is there.

October 12 2011 at 9:09 PM Report abuse rate up rate down Reply


October 12 2011 at 8:39 PM Report abuse rate up rate down Reply

The only two factors that should be allowed are payment history and the length of that history. All the other factors are based on someone else's history, not yours.

October 12 2011 at 8:05 PM Report abuse rate up rate down Reply

It is amazing and ridiculous that the entire process of generating credit scores in unregulated and not standardized, and yet has such an impact on people’s lives. The methodology for credit scores should be transparent and the methodology mandated by the government. Companies have played all sorts of games with “what is the real score”. In addition, it is absolute nonsense that companies reporting these scores take no responsibility for the validity of the data that is being used.

October 12 2011 at 7:39 PM Report abuse +1 rate up rate down Reply