If you're wondering how your credit score is calculated, the good news is that there are several factors you can control. The length and quality of your credit history are two important factors. The older your accounts are, the more likely lenders are to trust that you'll be able to pay them off on time. Your credit score can be improved by repaying loans over a longer term.
History of payments
One of the most important factors in determining your credit score is your payment history. A big drop in credit score can be caused by late payments. Plus, late payments remain on your credit report for seven years. It's crucial to make payments on time as soon as possible, even if they are just a few days late.
Age of accounts
Credit scoring models use information from your credit accounts to determine your credit score. However, your score can be affected by age-related factors depending on which scoring model you use and what company you work for.
Age of credit limit
Credit score can be affected if your accounts are older than average. Creditors appreciate proof that your accounts are active for a while. The more age of your accounts the better. Newer accounts, however, tend to have a lower average age and can hurt your credit score.
Timely payments
Payments made on time are a very important part of your credit score. These are sent to the three main consumer credit bureaus monthly. Late payments can have a negative impact on your credit score of up to 180 points. Make sure you pay your bills promptly
Recent loan activity
Your credit score will be affected by the amount of recent loan activity. High numbers of inquiries or new accounts can damage your credit score. The good news is that you can do something about it. You should first look at your credit report to make any necessary changes. You might open a new card, or get a small personal loan if your credit report isn't in order. Also, ensure that you pay your bills on time. If you are a good payer, your score will increase.
Soft inquiries
There are several ways that soft inquiries can affect your credit score. A soft inquiry is performed by lenders when you apply for a credit card. Insurance companies will conduct a soft inquiry when you apply for homeowner or auto insurance. These inquiries are not visible to the public, but they will be added to your report.