You may not be able to determine your credit score if you have never used credit. It is crucial to quickly learn how you can build good credit. There are many steps you could take to build credit. First, establish credit history. In most cases, this requires opening a credit card or two.
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. Also, credit utilization plays a significant role in your credit score. Your credit utilization ratio will be lower if your accounts are both revolving or installment.
Payment history
Your payment history is one of the most important parts of credit scores. Your payment history shows lenders how often and reliably you make your payments. This is important for your credit score as missed or late payments can lower your score. There are ways you can improve your payment history.
Credit utilization
The credit utilization percent is the amount of credit you have used compared to your total credit. This is calculated by taking the total credit limit of all accounts and your current account balance. This information can be found in your credit card account. You can also calculate it using a credit utilization calculator at Bankrate.com. 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
Length of credit history is a key factor that affects your credit score. It is estimated to account for 15% your overall score. But, other factors should also be considered. Your credit history is more important than your score. Lenders prefer customers with a better credit score to be approved for loans.
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 are able to give you a score of 300. However this is rarely the starting point. Your initial credit score is likely to be somewhere around 500. Your credit score will rise quickly as you prove yourself to be a responsible credit shopper.