Anyone here know how credit ratings are determined?

[MattTheSkywalker]

So say you have two credit cards. What if you take out a loan to cover those (better interest rate by alot and will pay off faster)...

And close one and keep the other open (but empty except for monthly balance that you will always pay off)

How will that affect your score? Will it go up as long as you don't generate any more debt (or decrease your debt?)

Or will it go down because you have more credit available?

I know it has something to do with revolving vs non-rev credit.

I don't know the exact alogirthm, but here is the basics:

Credit bureaus treat revolving accounts as more indicative of your ability to handle credit than an installment account.

If you can pay off a revolving account and replace it with an installment account (a loan), it will help, provided you stay current on the installment payments.

 

[sawastea]

There are five principal factors that impact your credit score.

Previous credit performance (payment history) 35%
Current level of indebtedness 30%
Length of credit history 15%
Pursuit of new credit 10%
Types of credit accounts 10%

That seems pretty accurate. I was reading up on FICO's after I recd my score and I do know 1/3 come from your previous credit performance.

Good post Matt.

 

[George Spellwin]

Like really know - if I asked a question like "if I do A vs B, which will get me a higher credit rating?"

Matt or APP?

This book has tons of good info in it:

The Money Book for the Young, Fabulous & Broke by Suze Orman

 

[dksteel]

check out

www.daveramsey.com