Factors that Impact Your Credit Score

1. Bill Payment History

Creditors and other businesses report your borrowing and payment behavior to the major credit reporting agencies.  This is an ongoing process, usually monthly. Consequently, the slightest deviation from on-time payments can hit credit scores.  Pay on time.

2. Amount of Credit You Use

Just because you were awarded a line of credit does not mean lenders look favorably when you overuse credit.  Your “credit use ratio” accounts for about a third of your FICO score. Your score will be higher when you keep all balances below 30 percent, preferably below 10 percent, of your credit limit.

3. Credit Mix

The best credit scores combine information taken from several types of loans. Revolving debt including credit cards is riskier as the debt can run high. In contrast, fixed balances carried through installment loans signal fixed payments over a fixed term. You might use an installment loan to buy furniture or a car. Having a mixture of debt types–mortgages, personal loans, student loans and other types of credit history–can improve your score by 10 percent.

4. Credit History – Past and Present

Fifteen percent of your credit score is determined by the age of the line of credit. A longer credit history provides lenders with more data. Newly opened accounts can be problematic, even if they do increase your total line of credit.

5. Credit Inquiries

Lenders looking at your credit to allow you to borrow money can affect your credit score. Try to limit hard inquiries and opt for allowing soft inquiries. Most of all, do not apply for too many loans at one time.