These are the two most important factors in your credit history. They make up nearly two thirds of your total score. These are your credit history and debt. 15% of this is dependent on the length and complexity of your credit history. Next, consider the types of credit that you have used. Aiming to avoid high balances, and paying on time, will increase your score.
Payment history
Your payment history is a key factor in determining whether you are eligible for a loan. Credit scoring models look at several factors when determining your score, including how you pay bills on time. Your overall score may be affected by late payments and the size of those payments. Pay your bills on time to prevent your score from being reduced.
Late payment is a major factor in your score. This is generally 30 days late. Your score will be affected if you pay late even for a few days. This mark will stay on credit reports for seven years. While lenders won't report late payments, they may charge fees if you miss your due dates.
Debt
Debt is an important part of your credit score, making up 30% of the total. It is crucial to track your debt and the amount you can afford each month. There are many factors that can affect how much debt you have. 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.
Paying down your debt is another way to improve your credit score. It is best to keep outstanding balances under 30% of your total credit limit. This shows that you are responsible for debt. Your payment record is also an important factor in determining your credit limit. If you have a track record of paying your bills on time, most lenders will not increase your credit limit.
Combination of credit
The mix of credit types you have can play a major role in determining your credit score. Although you may have good credit with both installment and revolving credit, it is not enough. You can manage many types of credit and still pay your bills in full every 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 comes from the mix of credit types that you have. This account mix can include installment loans and retail accounts as well as accounts from finance companies. A variety of credit types can help lenders assess your ability to manage your finances and improve your credit score.
Credit history length
The length of your credit history is an important aspect to consider when building a credit rating. Your score will rise the longer you have credit history. This factor is calculated by adding up the ages of all your accounts and dividing them by the number of accounts you have. Your average credit history is eight years. Your credit score takes into consideration the age of all credit accounts and how often you have used them.
The complicated algorithm used to calculate your credit score takes into account a variety of factors including the age of your accounts. Credit scoring models are based on the oldest account.
Debt to credit limit
Credit score is made up of many factors, including your debt-to-credit limit ratio. Your debt to credit limit ratio is a percentage of your total credit line. This number is often used in scoring formulas by lenders. Lenders want to see a low ratio of debt-to-limit. A high ratio could indicate that you're a risky borrower. This can lead to lower credit scores.
The debt-to credit limit ratio is calculated by subtracting the total amount you owe from the amount of credit available. You should aim to maintain a debt-to-limit ratio of less than 30%. Your credit score can be affected if it is higher than 30%.