Often times when someone is checking out, learning about or trying to improve their credit score they come across a pile of different terms and phrases that can be a bit difficult to understand. Obviously, in order to truly understand your credit situation you absolutely have to be able to understand the report that details your credit history.

Below are the five major areas of your credit that have an affect on your credit score, including a brief description of each.

Payment History

Your payment history makes up a monster proportion of your overall credit score and is often one of the top reasons that some people wind up in trouble with their credit. Since it makes up 35% over your credit score, it’s easy to see why.

This portion of the credit report takes into account almost every conceivable type of item that you can be or have been billed on. Credit cards, loans of all types (including the infamous payday loans or no credit check loans), department store cards and so on.

Additionally, your payment history portion of your credit report will also include such things as liens, judgments against you, bankruptcy, foreclosures and other financial items that can be found on your public record.

Amounts Owed

The amounts owed section of your credit score, although not as important as your payment history, does make up a large portion of your number. This section of your report constitutes roughly 30% of what your score will be.

As the phrase states, it’s exactly that, amounts owed. It takes into account nearly everything you currently owe money on including mortgages, personal loans, credit cards and other such things. Pretty much anything that you owe money on that gets reported to the agencies will be included in this portion.

In addition to your total amount owed, this portion of your credit score also takes into account the types of credit you have with outstanding balances. Different weight is added for high numbers of outstanding credit card accounts, you’ll see a different weight added if there are a high number of outstanding balances to high risk loans, etc.

Length of Credit History

This one is pretty self explanatory as it takes into account just what it says, the amount of time you have credit records on the books. You’ll find that this portion ofyour credit score is roughly 15%.

Another thing that this section also includes is the length of time you’ve had certain accounts, how long those accounts have had outstanding balances and also how long some of your accounts have remained dormant.

New Credit Inquiries

These are simply put the number of times someone has accessed your credit report for the purpose of determining whether or not you have a high enough credit score for whatever it is they are considering borrowing you. This is often something overlooked by many people working on their credit scores and it is about 10% of your overall score.

These will stay on your credit report for two years, but in tallying the score only inquiries from the last year will be used. Additionally, if you are the one looking up your own credit report then this is not added to the total of new credit inquiries.

Types of Credit Used

The types of credit you use in the financial portion of your life make up about 10% of your total credit score. Usually, this has little bearing on your overall credit score unless there are certain types of high risk credit patterns.

Such types of patterns would include a high number of payday type loans, a high number of high risk credit card accounts and items such as that.

With these credit score meanings in hand, hopefully, the next time you take a look at your credit report you’ll have a little better understanding of what everything really means and how to improve that area if necessary.

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