You might not be familiar with your credit score if this is the first time you use credit. That is why it is so important to learn how to build good credit quickly. There are many steps that you can take to build your credit score. Establishing a credit history is the first step. This usually requires opening one or more credit cards.
Credit mix
Your credit score is affected by the mix of credit accounts. Your overall credit score is affected by the proportion of installment credit compared to revolving. Your credit utilization is also a key component of your credit score. You will have lower credit utilization percentage if you have a combination of revolving as well as installment accounts.
Payment history
One of the most significant parts of your credit score is your payment history. Your payment history will show lenders how frequently and reliable you pay your debts. This is critical to your credit score since missed payments or late payments could lower your score. There are several ways to improve the payment history.
Credit utilization
The credit utilization percent is the amount of credit you have used compared to your total credit. This percentage is calculated by subtracting your current balance from your total credit limit across all accounts. This information can be found in your credit card account. Bankrate.com also offers a credit utilization calculator that can help you calculate it. For example, if you have a credit card with a $5,000 limit and have spent $500 on it, your credit utilization is ten percent.
Credit history length
Length of credit history is a key factor that affects your credit score. While it accounts for 15%, there are other factors that can impact your credit score. Your credit history will determine how high your score. Lenders tend to lend to customers with longer credit histories.
Interest rate
If you're new in the world of credit, it might be tempting to ask, "What credit scores do you need?" FICO and VantageScore average scores are 300. But this isn't where you will start. Your credit score at the beginning will likely be between 500 and 500. Your credit score will rapidly rise as you become a responsible credit user.