The first two factors in your credit report make up nearly two-thirds of your total score. These are payment history, and debt. The length of your credit history accounts for 15%. The second factor is the credit mix you have used. You will improve your score by taking care not to have high balances or making timely payments.
Payment history
If you're looking to get a loan, your payment history can make a big difference. When determining credit score models, several factors are considered. This includes how timely you pay your bills. Your score could be affected by how many late payments you make. Make sure to pay all your bills on time to avoid lowering your score.
A late payment can significantly lower your score. In general, it is 30 days late. Even a few days late can impact your score. This mark will remain on the credit report for seven-years. Lenders will not report late payments for more than 30 days, but they will charge a fee if you miss the due date.
Debt
The 30% of your total credit score that is made up of debt is important, and it accounts for 30%. It is crucial to track your debt and the amount you can afford each month. Several factors affect the amount of your debt. It is important to not charge things that you don't really have the cash for. If you owe more than you can afford to pay, this will lower your score.
To improve your credit score, you should pay off as much debt as possible. It is best to keep your outstanding balances below 30% of your total credit limit. This will show the lender that your debts are being paid on time. You can also increase your credit limit if your payment history is excellent. Lenders will increase your credit limit only if you are able to make your payments on-time.
Mix of credit for use
Credit score can be heavily affected by how many credit types you have. You may have a good mix of revolving and installment credit, but it's not enough to simply have one type. The ability to manage multiple types credit types means that you can pay off all of them each month. This credit mix could be cancelled if you are a frequent late payer, have high credit utilization, or have bankruptcy.
About 10% of your credit score is determined by the type of credit you have. This account mix can include installment loans and retail accounts as well as accounts from finance companies. A diverse credit mix helps lenders to see you are capable of managing your financial obligations and improving your credit score.
Credit history length
Credit history length is an important factor when building credit score. The longer your credit history, the higher your score will be. This factor is calculated by adding up the ages of all your accounts and dividing them by the number of accounts you have. Eight years is your average credit history. In addition to total credit account age, your credit score also considers the age of each individual account, as well as the last time you used that account.
A complicated algorithm calculates your credit score. It considers many factors, including the age you have had accounts. Credit scoring models are based on the oldest account.
Credit limit to debt
Your credit score is composed of several factors, including the debt to credit limit ratio. Your debt-to credit limit ratio is a percentage your total credit line. Many lenders use this number in their scoring formulas to calculate the ratio. Lenders like to see a low debt/to-limit ratio. A high ratio could indicate that you're a risky borrower. This can lead to lower credit scores.
Your debt-to-credit limit ratio is calculated by dividing the total amount of your debt by the total amount of credit you have available. A debt-to-limit ratio below 30% is a good goal. Your credit score can be affected if it is higher than 30%.