What is and what isn't in a credit score

Physicians in independent practice looking to build their business will undoubtedly need capital and credit. Whether it’s to expand the office, upgrade technology or buy new equipment, a physician’s credit score
will determine how much funding for which you’re approved-and having necessary capital can help you get through the lean times caused by delayed reimbursements.

Here are the five components that make up the Fair Isaac Corporation (FICO) score:

35% Payment History

This is whether you pay your bills when they’re due. Even the occasional missed payment can cause problems. If a creditor reports payment lapses to a credit reporting agency, negative credit accounts can stay on your credit report for seven years.

Tip: Make your payments on time by enrolling in automatic payments.

30% Credit Utilization

This is your loan balances and debt level compared to your overall credit limit. If your balance gets above 50%, it will affect your credit score.

If you use personal credit cards for your business, this might keep your revolving credit too high. 

Tip: Make small payments throughout the month to maximize cash flow and prevent the balance from reaching more than 50% of your credit limit. 

15% Credit History Length

This is how long you’ve had credit, from your first account to the most recent.
This factor also looks at how long it’s been since you’ve used certain accounts.

Tip: When you close a card, your credit availability is reduced and it affects the age of your account. Instead, designate an old card to use once a year and pay it off when it’s due. This keeps it open and benefits your score.

10% New Credit Inquiries

This is how often a potential creditor pulls your credit and/or you open new accounts.

Tip: A new account or inquiry could drop your score, especially when multiple actions take place in a short period of time. Get credit checks only when you need them. There are some exceptions that won’t have a negative impact on your score, such as exploring different mortgage offers. 

10% Credit Mix

This is your overall credit mix-a good mix includes mortgage loans, installment loans, credit cards and retail accounts. The number of accounts in each type isn’t as important as simply having experience with more than one type of account.

Tip: A mix is OK, if managed properly and paid on time.