Are you interested to figure out what is affecting your credit score? Lenders use credit scores to figure out how likely you are to pay back your debt—thus those scores are often the deciding factor in whether you will get a loan.
Here are 5 Factors that impact your credit the most and their percentage in terms of importance:
1. Payment History | 35%
Payment history defines how consistently you've made your payments on time. This is the most important contributor to your credit score.
2. Credit Usage | 30%
The amounts you owe is the outstanding debt you currently owe. The lower the amount of outstanding debt, the higher the credit score.
3. Age of Credit | 15%
Your credit history is based on the length of time you've had credit accounts open in your name. A longer credit history can help your credit score. If you've had a credit card open for a long time, it makes good sense to continue using that card responsibly to maintain a good score.
4. Credit Mix | 10%
Your score can increase if you responsibly use different types of credit, such as installment and revolving debt. Even so, it's not necessary to have many different types of credit in order to have a good score.
5. Credit Inquiries | 10%
Also know as new credit you apply for, the pursuit of new credit negatively affects your score. Every time you apply for credit, your score goes down. There is one exception: when you're shopping for a mortgage, student or auto loan, credit scoring models only count one inquiry if your comparison shopping with multiple lenders is done within a 14- to 45-day period.
Lenders use credit scores to figure out how likely you are to pay back your debt—thus those scores are often the deciding factor in whether you will get a loan.
(Originally published on FreddieMac)
As your financial profile changes, so does your score, so knowing what factors and types of accounts affect your credit score gives you the opportunity to improve it over time. If you have any questions or is looking to begin your home buying journey, let’s connect! Call or DM us now and let us guide you 𝓗𝓸𝓶𝓮 with Aloha! 🏡