5 Factors That Affect Your Credit Score
By now, most graduates have waved goodbye to grades, at least for the summer. But whether graduation was long ago or last week, you’re still being graded in one way you may not have realized: your creditworthiness.
Good, steady credit habits can go a long way.
Credit scores may be an evaluation of your creditworthiness, one way or another. In that sense, scores are very much like grades—you’re in control, and good, steady credit habits can go a long way. But just like with school grades, it also helps to have an idea of what credit score calculations are based on. That way, you can figure out what you need to work on so your credit’s at the top of the class when it counts—applying for a rewarding credit card, getting a great mortgage rate, and other situations where good credit may be critical.
Most credit scores can share some similarities in what they value. In approximate descending order of importance (most impact to least impact), theseSeveral factors tend tomay influence credit scores of all kinds, including:
- Payment history. Do you pay your bills on time? Your credit score may take into account any missed or late payments, how long they went unpaid, and how often.
- Amount owed. This includes totals you owe to all creditors, how much you owe on particular types of accounts, and how much available credit you have used.
- Types of credit. Generally speaking, the more types of accounts you have (credit cards, retail accounts, mortgage loans, installment loans), as well as the total number of accounts you have, influences your credit score.
- New loans. Have you shopped for or received new credit recently? Applying for credit with different lenders within a short period of time may lower your score, especially if you have a relatively short credit history to begin with.
- Length of credit history. The age of your oldest credit account, the age of your newest account, and the average age of all your accounts may each play a role in the calculation of your score.
If this seems overwhelming, don’t worry. Just make sure you’re doing your best to pay your bills on time and regularly check in on your credit. When you’re ready to take a deeper dive, look at how you can work on some of the above factors. With just a little bit of studying, you can graduate to a higher level of credit knowledge.