Page 23 - Credit Matrix: The Path To Financial Liberation Blue Contract

3. **Length of Credit History (15% of Your Score)**: "Making up 15% of your
score, this reflects how long you've had credit. A longer credit history provides a
fuller picture of your financial behavior. For instance, a credit history of 15 years
is more reassuring to lenders than a history of just one year."

4. **New Credit (10% of Your Score)**: "This accounts for 10% of your score.
Opening several credit accounts in a short time frame can appear risky to
lenders, especially if your credit history is short. Each new application typically
drops your score by about five points, but this can vary."

5. **Types of Credit Used (10% of Your Score)**: "The final 10% evaluates your
credit mix. Having a variety of credit types — like credit cards, retail accounts,
installment loans, finance company accounts, and mortgage loans — can
positively impact your score. It demonstrates your ability to manage different
types of credit."

Mr. Moor concludes, "Each component carries its weight, influencing your FICO
score to varying degrees. Understanding these percentages is key. For instance,
if you're aiming to improve your score, focusing on payment history and credit
utilization can be more effective than solely opening new accounts."

He gestures to a chart on the wall, illustrating the weight of each factor in the
FICO score formula. "See, the formula is a balance of these elements. It's a
dynamic system — changes in any of these areas can shift your score. For
example, consistently paying down debt can improve your utilization ratio,
positively affecting 30% of your score calculation."

"Ultimately," Mr. Moor adds, "your FICO score is a vital gateway to financial
opportunities. Prudent management of these factors, understanding their
numerical impact, and making informed financial decisions can significantly
elevate your credit standing, opening doors to better loan terms, lower interest
rates, and more financial freedom."

As you absorb this information, the library transforms from a place of learning to
a launchpad for financial empowerment. With Mr. Moor's guidance, the
complexities of the credit score system become clear, and you gain the tools to
navigate and enhance your financial journey.