5 Factors That Can Make Or Break Your Credit Score
Your credit score is one of the most important pieces of financial information about you. A good credit score can mean the difference between getting approved for a loan and being denied. It also makes a difference in getting a low or high-interest rate. Finally, a bad credit score can make it challenging to get approved for anything at all. Here are five factors that can make or break your credit score:
1) Payment History:
This is the most important factor in your credit score. According to many scoring models, it contributes to a large chunk of your credit score. Your payment history is a record of whether you’ve paid your bills on time, and if you’ve missed payments or made them late, it will hurt your overall score.
2) Utilization Rate:
This is the percentage of your available credit you’re using. It can be indicative of poor financial health if your credit utilization rate is high since it means that you are close to maxing it out. As a good rule of thumb, try to stay below a 30% utilization rate.
3) Length of Credit History:
A longer credit history is best. It shows that you’ve been managing your finances for longer which can be an indicator that you are more responsible. If you have a shorter credit history, you can improve your score by making all your payments on time and keeping your balances low. Overall, 15% of your total score is affected by the length of your credit history.
4) Types of Credit:
You should mix up your credit types whenever possible. For example, you can get a line of credit from Advance Financial along with having a credit card. Maintaining both of these forms of credit has a positive effect on your score since credit mix contributes about 35% to your credit score.
5) Credit Inquiries:
Lastly, the number of inquiries on your credit report can also impact your score. Every time you apply for new credit, an inquiry is added to your report. This is because you may be viewed by lenders as being desperate for cash if you make too many inquiries within a short time frame. If possible, you should try to space out your credit applications so they aren’t all bundled together. Credit inquiries account for about 35% of your credit score.