There are five main areas that affect your credit scoring: Paying bills on-time (35%), how much outstanding debt you have and how much you’re using of the total amount offered (30%), the length of time you’ve had credit (15%), the number of inquiries into your credit (10%) and the type of credit you have (10%). Additionally, the last 2 years of activity will account for 60% of your total score, which means that your past mistakes will still be on your credit score report, usually for 7-10 years, but you can begin to turn things around within the first 12 months of faltering.

If you are to take away one lesson about improving your credit scores range, it’s this: late or missed payments are bad, very bad. Payment history accounts for 35% of your credit score and includes everything from mortgage or rent to utilities, cell phone bills, credit cards, store charge cards, medical bills, auto loans, college tuition bills and student loans. If you are 30 days late on one payment, then it’s not likely to cause severe damage to your report. It’s only listed when you are “currently 30 days late” and even then, you can usually negotiate with your lender to cut you some slack since you’re normally a good borrower.

If you’re often 30 days late, then you may have a hard time convincing anyone to give you a favor. Once you’re sixty days late, your credit score will be slightly damaged, but when you hit more than 90 days you’ll have a tarnished score, which could be something like 100 points deducted for up to 7 years! After 120 days, it’s likely you’ll have a charge-off on your record or an account that slips into collections. Short-term collection accounts will hurt you 50-75 points, although financial advisers at the Gallant Group say that older accounts won’t hurt you as much, as these are just “a blip on the radar screen,” they said. However, if you’re applying for a new loan, then you may occasionally be required to go back and resolve any past due items on your report before being approved.

More On: How Credit Scoring Works

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This entry was posted on Friday, October 10th, 2008 at 7:13 am and is filed under Financial Services. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.