Top Factors That Easily Influence the Ups and Downs of Your Credit Score
Credit scores often fluctuate, evolve, and they even hold incredible power over your financial future. As a side note, if your credit score is low, consider taking a credit repair. You can check here for facts about credit repair. Whether you’re dreaming of that dream home or eyeing that shiny new car, understanding what influences your credit score is essential to achieving those goals. Now, let’s jump right into factors that easily sway your credit score in one direction or another.
Credit Utilization
Next, with a 30% influence on your credit score, credit utilization basically refers to the percentage or amount of your available credit that you are currently using. Lender companies like to see a low credit utilization because it shows that you are responsibly managing your available credit. The ideal one should be below 30% of your total available credit limit. High levels of credit utilization can negatively impact your credit score. It may suggest to lenders that you are relying too much on borrowed funds and could be at risk of defaulting on payments.
Payment History
Taking 35% of your credit score, payment history is like the foundation of your credit score – it’s the first thing lenders look at when assessing your financial trustworthiness. Timely payments demonstrate responsibility and reliability, while missed or late payments can send red flags flying. Every payment you make (or miss) gets recorded and can have a lasting impact on your credit standing. Late payments can easily be detrimental to your credit score, so it’s imperative to pay bills on time. Even a single missed payment can haunt you for years, dragging down your overall creditworthiness. On the flip side, consistently making payments by their due dates showcases financial discipline and boosts your score.
Length of Credit History
Exactly 15% of your credit score is determined by the length of your credit history. Lenders want to see that you have a track record of responsibly managing your credit over an extended period. When it comes to the length of credit history, there are two key factors that lenders consider. These include the age of your oldest account and the average period of all your accounts. The older these accounts are, the better it reflects on your ability to handle credit. Having a longer credit history shows stability and reliability. It demonstrates that you have been able to maintain good financial habits over time.
Types of Credit Used
Lender companies also like to see that you can responsibly manage different types of loans and debt. One type of credit that is commonly considered by lenders is revolving credit, such as credit cards. This shows that you can handle ongoing lines of credit and make regular payments on time. Mortgages also play a role in determining your overall financial responsibility. A well-managed mortgage loan shows stability and commitment. So, aim for responsible borrowing habits across all types of credits used
New Credit Inquiries
Last but not least, when you decide to apply for new credit. This includes a loan or a credit card, the lender will typically run a quick check on your credit report to assess your borrowing history and financial health. This results in what is known as a hard inquiry. Your goal should always be responsible and strategic borrowing rather than chasing unnecessary lines of credit.…
