What factors affect your credit score?

A credit score is a three-digit number that represents your trustworthiness in paying back loans or credit that has been extended to you.


The main purpose of a credit score is to indicate to others you are responsible and typically take care of your debts. However, your credit score can also influence other decisions.

One of the biggest decisions your credit score can influence is whether you are eligible for a loan. Even if you are found eligible for a loan, your credit score will have a significant impact on how much you can receive from the loan, your overall interest rates and possible payment schedules.

Your credit score will typically range from 300 to 850. Some industry-specific credit scores will start at 250 and go up to 900. No matter which scale is used, the higher the number, the better your credit.

If you are planning to make a large purchase, such as purchasing a home, a new vehicle or opening your own business, your credit score is very important. There are a number of factors that influence your credit score. By understanding the factors that affect your credit score, you can guarantee your score remains high enough to achieve your goals.

It is important to take into consideration factors that affect your credit score, such as:

  • Payment history.
  • Your debt to income ratio.
  • Credit history.
  • Having a varied credit portfolio.
  • Hard inquiries on your behalf.

Payment History

Your payment history makes up 35 percent of your credit score. Payment history refers to whether you have paid off your previous debt. Normally, this applies to paying your past credit card bills. However, if you have ever taken out any sort of installment loan, such as a mortgage, those payments will be factored into your payment history, too.

For many lenders, your payment history is the most important factor in determining whether you get a loan. For lenders, payment history represents how reliable you are with your payments. If you can prove you have a history of paying back your loans on time, you have a much better chance of negotiating with a lender.

When looking at your payment history, lenders are most interested in installment loans. However, depending on your financial history, you may not have any installment loans. This is perfectly normal, especially if you are a younger consumer.

If you do not have any installment loans, you can influence your payment history by getting a credit card. Even if you only use your credit card sparingly for small purchases, you will improve your overall credit score and create a payment history by paying off these purchases on time.

Current Debts or Amounts Owed

The second biggest factor for your credit score is your current debt, sometimes referred to as the total amount you owe. Thirty percent of your credit score is determined by your current debts. If you currently owe a lot on another loan or have several credit cards that are nearly maxed out, your credit score will take a heavy hit.

When looking at your current debt, lenders will compare how much you owe, versus the total amount available to you. For example, if you owe $1,500 dollars on a credit card with a maximum credit limit of $10,000 dollars, your credit score should only take a minimal hit.

For lenders, this shows you are responsible with your money and do not end up over your head while borrowing from other sources. Lenders typically want to know you do not spend more than you make each month.

Credit History

Credit history makes up 15 percent of your credit score. Credit history is sometimes confused with your current debt. While the two categories are similar, the main difference is that credit history only looks at the total time you have had a credit card and not any of the payments you have made with the credit card.

Specifically, your credit score is based on how long you have had all your accounts, when your newest credit card account was established, how long since you have last used all of your accounts and the average age of all your accounts.

In most situations, the further back your credit history goes, the higher your credit score will be. If you have an average payment history and do not owe too much in debt, having a long credit history may be enough to boost your credit score to an above average score.

If you have a relatively short credit history, it is still possible to have a high credit score as long as you have made all of your payments and only owe a minimal amount for your current debt.

In addition to length, the total number of credit cards you own also impacts your credit score. Even if you have a great credit score, you may inadvertently lower your credit score if you open too many credit accounts in a short period of time.

For lenders, this raises multiple red flags, since you are suddenly responsible for multiple debts. It can also make it seem like you are trying to make one large payment by dividing it among several smaller avenues of credit. If you are new using credit cards and have more than two or three credit cards, including store cards, consider scaling down.

Older consumers, especially those who have decades of spending history, can usually handle having more without having it negatively impacting them.

Types of Credit

The types of credit you have, also known as your credit mix, makes up 10 percent of your overall credit score. Types of credit will include how many credit cards you own, your mortgage, car loans, student loans and home equity loans.

It is better for you to have multiple types of credit instead of a single credit source, such as owning multiple credit cards. The reason is it shows that a wide variety of lenders have considered you trustworthy, and it shows you are able to handle debt on both a large and small scale. For younger credit card holders, two credit cards are considered the maximum you can own before your credit score takes a hit.

Depending on your financial history, owning more credit cards may not have a negative impact, especially if you are older and have a more established credit history. Even if you do own multiple types of credit, your overall score should not lower significantly as long as you keep up with your payments and do not have a large amount of active debt.

Number of Inquiries

One of the credit factors you may overlook is the number of credit inquiries made on your behalf. Each time someone takes a look at your credit score, it can lower your score slightly. However, the overall impact from the number of inquiries is relatively minimal if those inquiries are done all at the same time.

For example, if you are car shopping and are asking each dealer to pull your credit in order to make you a good deal, that may not affect your credit score so much, if at all. Many credit scoring models try to take into account making multiple inquiries in a short period of time to shop around for the best possible loan.

As long as all the inquiries occur within the same time frame, you should not notice significant changes in your credit score.


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