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What Affects Credit Score?

Good credit relies on more than simply paying your bills on time. Credit scores are calculated based on five factors, with both negative and positive credit behavior being taken into account. Knowing what affects your credit score can help you improve and manage your score.

Payment History

Think twice before making a late payment since payment history accounts for 35% of your credit score. Late payments, liens, charge-offs, bankruptcies, judgments, and collections take your score down the largest percentage.

Credit Utilization

You may think that it doesn’t matter if you max out your credit cards as long as you make the monthly payments. But using most of your available credit utilization will take your score down, as well. 30% of your score comes from Credit Utilization. If you have a high debt on one card, consider spreading it among several cards so you have lower balances on each, which can improve your score.

Account History

Fifteen percent of your score depends on how long you have held your credit cards. This is why it’s recommended to keep accounts open rather than closing them, and keeping a small amount of activity on the card. As an example, many people who have a score over 800 have had multiple accounts open for at least seven years.

Credit Inquiries & New Debt

Applying for too much credit can lower your score, with the number of credit inquiries and new debt accounting for 10% of your score. However, mortgage loan inquiries within 30 days of one another are treated as a single inquiry and auto loan inquiries happening within 14 days are grouped together.

Debt Types

The final 10% of your score is based on the type of credit you have; installment vs. revolving debt. Installment debts or non-revolving loans are debts such as car payments, mortgages, or student loans. Revolving debts include credit cards and lines of credit.

As you can see, the bulk of your credit score depends on your Payment History and Credit History. By staying up to date on your payments and maintaining low balances on all of your credit cards, you will get the largest boost to your overall credit score.


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