The first two factors in your credit report make up nearly two-thirds of your total score. These are your credit history and debt. The length of your credit history accounts for 15%. The next factor is the mix of credit you have used. Taking care to avoid high balances and making payments on time will increase your score.
Payment history
Paying your bills on time can make all the difference in getting a loan. Credit scoring models take into account many factors to determine your score. The number and size of late payments you make can affect your overall score. You can lower your score by making timely payments on your bills.
Late payment is a major factor in your score. This is generally 30 days late. A delay of just a few days will affect your score. The mark will remain on your credit file for seven years. Lenders won't report payments that are more than 30 business days late. However, they will charge fees if your due date is missed.
Debt
Credit score includes 30% of debt. It is crucial to track your debt and the amount you can afford each month. The amount of your credit can be affected by several factors. Avoid charging for things you don’t have the funds for. Your score will drop if your owing more than what you can afford.
Another way to boost your credit score is to pay down as much of your debt as possible. It is best to keep your outstanding balances below 30% of your total credit limit. This shows lenders that you are responsible when it comes to debt. You can also increase your credit limit if your payment history is excellent. Lenders won't increase your credit limit if your payment history is excellent.
Credit mix in use
Your credit score is affected by the type of credit you have. Although you may have good credit with both installment and revolving credit, it is not enough. You can manage multiple credit types and pay them all each month. This credit type can be disregarded if you have a history that includes late payments or high credit utilization.
The percentage of credit types you have is about 10% of the credit score. This could include retail accounts and installment loans. A variety of credit types can help lenders assess your ability to manage your finances and improve your credit score.
Credit history length
When building credit scores, it is important to take into account the length of your credit history. Your credit history will determine how high your score. This factor is calculated by adding up the ages of all your accounts and dividing them by the number of accounts you have. Eight years is the average credit history. Your credit score includes the total age of your credit accounts, along with the age of each account and the time that you last used the account.
Your credit score is calculated based on a complicated algorithm that considers a number of factors, including the age of your accounts. Your oldest account serves as a base for credit scoring models.
Credit limit to debt
Credit scores are composed of many factors. Your debt to credit limit is a percentage from your total credit. This number is used in many scoring formulas by lenders. Lenders like to see a low debt/to-limit ratio. A high ratio could indicate that you're a risky borrower. This can lead to lower credit scores.
Your debt-to-credit limit ratio is calculated by dividing the total amount of your debt by the total amount of credit you have available. A debt-to-limit ratio below 30% is a good goal. If you exceed that number, your credit score could be affected and you might be unable to purchase a home or refinance your existing loan.