Factors That Affect Your Credit Score

Do you know what the top 5 factors that affect your credit score? You know, the number that has the biggest influence of your life.

When you are looking to purchase a new car, apply for a credit card, or even purchase your first home, the lender will evaluate you by your credit score.

The credit score will tell the lender everything they need to know about you so they can decide if they want to offer credit to you, the amount, and the rate.

Your Credit Score can impact your life in so many ways so it is important to understand the 5 factors that affect your credit score so you can have good credit.

A credit score is a huge part of life but for some reason, the education system doesn’t focus on teaching any real life skills, including how important a credit score is!

I really don’t know why highschools don’t focus on teaching some basic life skills.

So many kids are graduating high school without knowing the basics to be adult such as: how to write a check, interest rates and investments, complete your taxes, build resumes, how to interview for a job, and so many other things!

HOW TO CHECK YOUR CREDIT REPORT

Creditors are not the only one that can check your credit report, you can check your own credit report too! You should check your credit report regularly to make sure everything looks correct.

Sometimes not everything is reported to all the credit bureaus. Sometimes a lender will only report it to one bureau. Regardless what is sent, all 3 credit bureaus will use the information they receive, whether it’s positive or negative, to create a credit report. So you will want to keep an eye on your own credit report to ensure no one has stolen your identity or your lender reported false information.

There are 3 Credit Bureaus: Transunion, Experian, and Equifax.

You can request a credit report directly from the credit bureaus. You can even request to see what you FICO credit score, is which is the more common score creditors use to evaluate you.

Be careful if you use websites like Credit Karma. They will give you your credit report and a credit score calculated by VantageScore 3.0 credit scores. This is not the same score creditors use. S

WHAT ARE THE TOP 5 FACTORS THAT AFFECT YOUR CREDIT SCORE

There are many things that can affect your credit score but the top 5 factors that affect your credit score are the following:

1 – PAYMENT HISTORY

You want to make sure you make all your payments on time. Paying one of your accounts late, even by one day, will cause a little ding on your credit report and your credit report will drop.

So you will want to set up automatic payments to help you to always pay on time so you can have a excellent payment history, which can improve your overall credit score.

2 – CREDIT USAGE

You always want to keep your balances at less than 30% of your total credit limit.

So just because you are eligible to use more credit, DON’T! You want to maintain an excellent credit score. So keep your credit usage low so you don’t end up with a lot of credit debt.

3 – LENGTH OF CREDIT HISTORY

The length of credit history is an important factor that creditors look at. So if you haven’t had accounts opened for long, make sure you don’t miss one payment. Crdits looks at your credit history so they can predict what your future payments could look like.

So you will want to keep your oldest accounts opened because if you close them, you may see a dip in your credit score.

4 – TYPE OF CREDIT ACCOUNTS

You will want to have a variety of different type credit accounts such as, credit cards, car loans, mortgage, and even student loans or installment loans.

They all function differently with different due dates, payment amounts, interest calculations, and term lengths. Each type of loan you have can tell the future creditor that you have experience managing multiple types of loans.

5 – NEW LINES OF CREDIT

If you open a new account and make payments on time, it can have a positive impact on your credit score.

Opening too many accounts too quickly can negatively impact your credit score. New accounts will not have enough history and you could appear risky for opening (or trying to open) too many accounts at once.

Remember, every time you apply for a new line of credit, a lender will make a hard inquiry. Hard Inquiries will show on your credit report. So be selective when shopping around for car loan, credit cards, and mortgages.

FINAL THOUGHTS

Your credit score is a number that has the biggest influence of your life.

So don’t be wreckless when it comes to your credit score and credit report. Pay attention to the top 5 factors that affect your credit score.

Only charge what you can afford because you don’t want to end up in a lot of debt. Pay off your balances every billing period so you don’t get hit with interest charges or fees.

Sometimes life happens so if you do start piling on a lot of debt, check out these 12 Ways to Make an Extra $1000 a Month.