These two factors make up almost two-thirds your total score. These are debt and payment history. 15% is determined by how long your credit history has been. The next factor is the mix of credit you have used. Aiming to avoid high balances, and paying on time, will increase your score.
Payment history
A payment history can have a significant impact on your ability to borrow money. When determining credit score models, several factors are considered. This includes how timely you pay your bills. Your overall score will be affected if you have made late payments. Make sure to pay all your bills on time to avoid lowering your score.
Late payments can have a significant impact on your credit score. It is usually 30 days late. Even a couple of days late will hurt your score, and this mark will stay on your credit report for seven years. While lenders won't report late payments, they may charge fees if you miss your due dates.
Debt
Your credit score is 30% dependent on your debt. You need to be aware of how much debt you have and how much you can afford to pay each monthly. There are many factors that can affect how much debt you have. You should not be charging anything that you don’t have cash for. This will reduce your score if you owe greater than you can afford.
A great way to increase your credit score is by paying off as much of your outstanding debt as possible. It is best to keep outstanding balances under 30% of your total credit limit. This will show the lender that your debts are being paid on time. If your payment history is good, you can increase your credit limit. Most lenders won't increase credit limits if you have a history making timely payments.
Credit mix in use
Your credit score will be affected by your credit mix. A good mix of installment and revolving credits is important. However, this doesn't mean you should only have one type. A mix of credit types shows that you can manage multiple types of accounts and pay them off in full each month. This credit mix is not recommended for people with a history of bankruptcy, late payments, excessive credit usage, or bankruptcy.
About 10% of your credit score comes from the mix of credit types that you have. This mix could include installment loans as well retail accounts, corporate accounts, and mortgage loans. Diverse credit types help lenders see that you can manage financial obligations and improve score.
Credit history length
Credit history length is an important factor when building credit score. Your credit history will determine how high your score. This factor is calculated by adding the ages of all accounts to the total and subtracting the number of accounts. Eight years is the average credit history. Your credit score takes into consideration the age of all credit accounts and how often you have used them.
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.
Debt to credit limit
Credit scores are composed of many factors. Your debt to credit limit is a percentage from your total credit. Many lenders use this number in their scoring formulas to calculate the ratio. Lenders are more comfortable with a low debt to limit ratio. High ratios can indicate that you are a risky borrower and could lower your credit score.
Calculating your debt to credit limit ratio means dividing the total debt amount by the amount of credit that you have. It is best to aim for a debt ratio below 30%. You could lose your credit score and be unable refinance or purchase a house if your debt-to limit ratio is higher than 30%.