Your credit score is a three-digit number that lenders use to determine your creditworthiness. It can impact everything from whether you get a loan to what interest rate you pay.
There are many factors that influence your score, but two of the 아파트담보대출 most important are payment history (35%) and credit utilization (30%). Learn how to manage those and other elements of your credit score.
Payment History
Payment history is a huge factor in your credit scores. For example, according to FICO, one of the most popular scoring models, payment history makes up 35% of your score. Lenders want to know you’ve paid debts back on time and have a track record of doing so. That’s why a single late payment can drop your score significantly, even if you don’t miss another one for quite some time.
Payment history includes your repayment of balances on credit cards and loans that report to the credit bureaus, such as mortgages, auto loans, personal loans and retail credit cards. It also includes public records like judgments, liens, foreclosures and bankruptcies. It’s important to understand that credit bureaus can only legally report negative information on your credit reports if it is at least 30 days past due. And even then, the impact of a missed payment on your credit score may be mitigated by the length of time since you last made a late payment.
Length of Credit History
The length of your credit history is a factor that can help lenders gauge your creditworthiness and risk level. In general, lenders prefer borrowers who have a longer track record of managing loans and credit cards. This demonstrates that you have the experience necessary to handle your credit obligations responsibly and may be less likely to make late payments or otherwise miss payments in the future.
Length of credit history accounts for 15% of your FICO score and 21% of your VantageScore 3.0 score. However, both scoring models consider your average account age a more significant factor than the length of your individual credit histories.
For this reason, it’s best to keep your oldest accounts open, especially if they have a no annual fee. Closing old revolving credit accounts can lower your average account age, which will ultimately reduce your scores. This can be counterproductive to your credit goals, so it’s generally a good idea to avoid closing accounts that have a long history of responsible use.
New Credit Inquiries
When you apply for a new credit card or loan, the lender will check your credit history with one of the three major credit bureaus. This is called a hard inquiry and it affects your score. You can also have soft inquiries, which are shown only to you and don’t affect your scores at all. These include preapproved credit offers, your requests for a copy of your own report and checks by employers, landlords and insurance companies with your permission.
The new credit category counts for 10 percent of your credit score, with payment history responsible for 35 percent and credit utilization another 30 percent. But the biggest component is how long you’ve had credit and how old your oldest account is. And then there are the inquiries, which factor in about a quarter of your score. This includes both hard and soft ones, as well as the number of them you have recently. Generally, the more inquiries you have in a short period of time, the lower your score.
Credit Utilization
Credit utilization—how much you owe on your credit cards compared with the total available balances—is one of the most important factors impacting your credit score. Most experts recommend keeping your utilization ratio below 30%, with lower being better.
The good news is that you can improve your utilization by paying down your debt. The best way to do that is by focusing on paying off balances before the end of your billing cycle so they’re reported at zero. You can also try increasing your credit card limits or adding authorized users to your accounts to help lower your utilization ratio.
However, you should think twice before closing unused credit cards because doing so could increase your utilization ratio and shorten your overall account age, which is another factor in your credit scores. Plus, you can often earn rewards by keeping a credit card open, which may be more beneficial to your financial well-being.