Top Factors That Can Make or Break Your Credit Score
Imagine you’re trying to apply for a mortgage, only to find that you’re being rejected instantly. Now you may be wondering what the issue is. It turns out that your credit score is way below the average. Did you know that your credit score is one of the most important numbers in your life? It can affect your ability to get loans, rent an apartment, and even get a job. Your credit score is determined by a variety of factors, some within your control and others that are out of your hands. But what can really affect the up and down of your credit score? Keep reading and learn the most significant factors that determine your credit score and what you can do to improve it.
Amounts Owed
One of the biggest factors that affect your credit score is the amount of debt that you have. This includes not just credit card debt but also things like student loans and car payments. The more debt you have, the lower your credit score will be. This is because lenders see you as a bigger risk if you already have a lot of debt. They’re worried that you might be unable to make your payments on time or at all. Working on paying down your debts can help improve your credit.
Payment History
When it comes to your credit score, your payment history is one of the most critical factors. This includes whether or not you’ve made your payments on time and in full. Lenders want to see that you’re responsible with your money and can be trusted to make your payments on time. If you have a history of late or missed payments, it will hurt your credit score. On the other hand, having a good payment history will help improve your credit score. Setting up automatic payments for your bills is what you can try if you have a significant issue with your payment history.
Types of Credit in Use
Keep in mind that not all debt is created equal. Different types of debt will have different effects on your credit score. For example, having a lot of credit card debt will hurt your score more than having a student loan. This is because credit cards are seen as riskier. Lenders want to know that you can handle different debt responsibly before giving you more. So, if you’re trying to improve your credit score, it’s a good idea to diversify your debt types.
Credit History Length
Another factor that can affect your credit score is the length of your credit history. The longer you’ve been using credit, the better it is for your score. This is because lenders want to see a history of responsible borrowing before they give you more money. So, if you’re trying to work on your credit score, it’s a good idea to keep your old credit cards open, even if you’re not using them.
These are just a few factors that can affect your credit score. By understanding how these factors work, you can start to improve your credit score and get access to the things you need in life. With a little effort, you can improve your credit score and get access to the things you need in life. Do you have any other tips on how to improve your credit score? Share them with us in the comments below.