You guys know you don’t have to speculate how to build credit right? It’s not some hit or miss type of random thing that you are forced to try and figure out patterns from. If you’re out of school and managing your own money I’d highly suggest reading this book: http://www.amazon.com/Money-Book-Young-Fabulous-Broke/dp/1573222976
I wish I had read it sooner than I did.
Since I don’t expect anyone to go buy it now just because it would unlock the mystery of credit and give you knowledge not heresy for planning your finances, here are some cliffs from wikipedia:
Makeup of the credit score
Credit scores are designed to measure the risk of default by taking into account various factors in a person’s financial history. Although the exact formulae for calculating credit scores are closely guarded secrets, Fair Isaac has disclosed the following components and the approximate weighted contribution of each:
* 35% punctuality of payment in the past (only includes payments later than 30 days past due)
* 30% capacity used: the ratio of current revolving debt (credit card balances, etc.) to total available revolving credit (credit limits)
* 15% length of credit history
* 10% types of credit used (installment, revolving, consumer finance)
* 10% recent search for credit and/or amount of credit obtained recently
The above percentages provide very limited guidance in understanding a credit score. For example, the 10% of the score allocated to “types of credit used” is undefined, leaving consumers unaware what type of credit mix to pursue. “Length of credit history” is also a murky concept; it consists of multiple factors - two being the oldest account open and the average length of time an account has been open. Although only 35% is attributed to punctuality, if a consumer is substantially late on numerous accounts, his score will fall far more than 35%. Bankruptcies, foreclosures, and judgments affect scores substantially, but are not included in the simplistic pie chart provided by Fair Isaac.
Further, Fair Isaac does not use the same “scorecard” for everyone. The scorecards are segmented so that there are over 100 different actual scoring models that are applied to different individuals based on different ranges of input values (some scorecard segmentations include: age, depth of credit history, etc.) The implications of this segmentation are that while the approximate weighted contribution above may be an average across all scorecards, individuals will receive different scores or weightings based on the scorecard segmentation that they fall into. Some consumers have noticed their scores decreasing by small amounts for no apparent reason.
Current income and employment history do not influence the FICO score, but they are weighed when applying for credit. For instance, an unemployed individual with no other sources of income will not usually be approved for a home mortgage, regardless of his or her FICO score.
There are other special factors which can weigh on the FICO score.
* Any monies owed because of a court judgment, tax lien, or similar carry an additional negative penalty, especially when recent.
* Having above a certain number of consumer finance company credit accounts also carries a negative weight (critics say that this causes a vicious cycle, locking people into continuing to use consumer finance companies).
* The number of recent credit checks also can weigh down the score, although the credit agencies claim to allow for credit checks made within a certain window of time to not aggregate, so as to allow the consumer to shop around for rates.
Even this definition kind of sucks because it’s not a “closely guarded secret.” Just read a book and take the guesswork out of credit.