What Criteria Do Credit Companies Use to Rate Credit Worthiness?
A smorgasbord of financial information is used to rate credit worthiness. A few of the most widely used types of information include:
- Late payments
- Delinquencies
- Bankruptcies
- Outstanding debt
- Length of credit history
- New applications for credit
- Types of credit in use
Credit companies look at three factors when evaluating this financial information: severity, timing, and frequency. For example, a report of a 30-day late payment is not as serious as a 90-day late payment. Also, late payments from four or five years ago aren't as harmful if you've been paying your bills on time since then, and one late payment is not as risky as five or six delinquencies.
Most credit information is obtained from one of the nation's three large credit bureaus — Equifax, Experian, or TransUnion.
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