Ever wonder how your credit score is determined? Credit reports take five aspects into consideration… but not all aspects are treated equally.
Your payment history is the most important aspect – and is about 35% of your credit score. Credit bureaus look at whether you pay your bills on time and how often you had late or missed payments.
Outstanding debt level ranks second at 30% of your credit score. Credit bureaus consider the number of open accounts you have and the amount of debt you have compared to your credit limits.
The length of your credit history impacts 15% of your score. The longer your credit history the higher your rating, as long as you don’t have any loan defaults or late payments.
Your mix of credit represents 10% of your score. Lenders look favorably if you have both credit card and installment loans such as a car payment or home mortgage.
Finally, new credit makes up the last 10%. Lenders don’t like to see that you have opened or applied for many new credit accounts within a short period of time.
Now that you are aware of the core factors that affect your credit rating, you know the areas that you can work on to improve your score.
