Your credit score may not be known if you've never used credit. It is crucial to quickly learn how you can build good credit. There are many steps that you can take to build your credit score. It is important to start building a credit record. This usually requires opening one or more credit cards.
Credit mix
The mix of your credit accounts is a very important factor in determining your credit score. The percentage of revolving credit versus installment credit is a major factor in your overall credit score. In addition, your credit utilization is a major component of your credit score. Your credit utilization ratio will be lower if your accounts are both revolving or installment.
Payment history
One of the most significant parts of your credit score is your payment history. Your payment record shows lenders how regularly and reliably your payments are made. It is essential to your credit score. Late payments and missed payments can lead to a lower score. Fortunately, there are ways to improve your payment history.
Credit utilization
Credit utilization percentage refers to the percentage of credit used against 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 offers a credit usage calculator which can be used to calculate it. Your credit utilization is 10% if you have a credit line with a limit of $5,000 and have already spent $500.
Credit history length
Credit history has a significant impact on your credit score. It accounts for 15% of your overall score, but other factors are also considered. Your score will increase the longer you have had a credit history. Lenders tend to lend to customers with longer credit histories.
Interest rate
You might be new to the world credit and wondering "What credit score can you start with?" FICO and VantageScore are able to give you a score of 300. However this is rarely the starting point. You can expect your first credit score to be close to 500. Your credit score will increase quickly as you are a responsible credit-user.