Who Controls Credit Scores?

Who Do You Think Controls Your Credit Score?

In February 2012, FreeScore.com conducted a survey of 300 U.S. consumers and asked them who they thought controls their credit score.  More than half (53 percent) thought they had more control over their credit score, while 47 percent thought the lenders did.

Most (81 percent) thought they could control their credit scores and 19 percent thought they could not.   A majority (65%) of the responders thought the economy could impact personal credit scores and 35 percent did not.

This is a very small sample on which to base a general assumption of the population.  This does provide insight into the misconceptions some have.  Do you share the same opinions?

Five key components of your credit score

You impact your credit score because you make the purchases, sign the loans, and pay the bills.  Your credit score is made up of five key components:

1. Payment history which comprises 35 percent of your score
2. The amounts you owe on your accounts, which is 30 percent.
3. The length of time you have had credit, which is 15 percent.
4. New credit accounts and inquiries, which is 10 percent.
5. The different types of credit you use, which is 10 percent.

In other words, you control your credit score by how currently you pay your bills, how much you owe, how long you have had credit, how often you seek credit and the mix of credit you have.

Economy and lenders

The economy can have an impact on your credit score.  You may not be able to pay your bills on time or in full because of job loss, underemployment, higher prices of food and gas, and/or the depressed housing market.

It has been more difficult to get credit cards and loans during the great recession, because lenders have tightened their underwriting criteria. This may have been the reason some think that the lenders control their score.  Lenders report how you pay your credit obligations, which is current, 30 days past due, 60 days past due, 90 days past due, charge-off, bankruptcies.  This is based upon your payment behavior.

You control how much you purchase and how you pay your bills.  You may feel overwhelmed and not able to pay your bills in full because of the economic conditions.

Credit Expert Witness, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Auto Loans, Bankruptcy, Credit Cards, Credit Report, Credit Score, Debt, Getting Credit

This post was written by John Ulzheimer