What Affects Your Credit Score?

Factors that influence your credit score.

Your credit score changes along with your financial profile. When you have a job, for example, when your income increases, and your credit score usually gets better.

The same is true when you buy a house or take on other similar types of debt.

While the exact factors that affect your credit scores can vary by scoring model, check out this list of the common factors that you might want to address.

Payment history

Your credit score is a measure of how risky it may be for credit providers to lend you money. Collections, public records, foreclosures and bankruptcies can dramatically lower someone's credit score. The largest contributing factor in your credit score is your payment history, which accounts for 35%.

The amount of money you owe

Your credit usage, as measured by your credit utilization ratio, is the next most important factor in determining your credit scores. Your credit utilization ratio is calculated as a percentage by dividing the amount of debt you have currently to the maximum or total amount of revolving debt you could theoretically obtain. This percentage looks at how much of your available credit you're using and can give a snapshot of how reliant you are on non-cash funds.

The length of your credit history

How long you've had a credit card, mortgage or car loan for counts towards your credit score. The longer you've kept each type of credit account open, the better it is for your overall credit history and score.

Credit mix

Having a top notch credit score is somewhat like having a well-rounded education. You may have completed or are still currently completing college, but that doesn't mean you should ignore continuing your education opportunities outside the classroom either! By maintaining a diversified credit mix - meaning an assortment of loan accounts - you can increase your credit score and demonstrate responsible credit management skills.

Brand new credit

The number of credit accounts you've recently opened and the amount of hard inquiries lenders make because of it accounts for 10% of your credit score. Although this may appear to be a large part, not all credit inquiries will impact your score. Also, the length of time since you last applied for credit seems to outweigh inquiries affecting your score.

It’s so important to know what affects your credit score so that you can make the most of it. For more information on how your credit score is calculated, get in touch with Credit Health.