The approval of your credit request depends on several factors, among which your credit score is one of the most important. This three-digit number indicates your creditworthiness. It is actually simple to figure out what affects your credit score. And by knowing these factors, you get an opportunity to improve your credit score over time.
Read on to learn more about the factors that have an impact on your credit score.
Here are the five most important factors that have an impact on your credit scores:
- Payment history
- Length of credit history
- Credit mix
- Credit utilization limit
- New credit
Credit scores are heavily influenced by payment history, and even one missed payment can negatively impact your score. The later you are, the worse it is for your score. Both FICO and VantageScore place a lot of emphasis on payment history when calculating your credit score. FICO considers it the top-most scoring factor and accounts for 35% of the score.
Credit history also affects your credit score. It takes into consideration the age of your oldest account and the average age of all accounts. The account’s age helps in boosting the credit score. And this is why it is advisable to leave your credit card accounts open even if they are not used. A long credit history has a great impact on increasing your credit score if there are no late payments.
It is common for people with top credit scores to have a diverse portfolio of credit accounts, including installment loans, auto loans, mortgages, student loans, personal loans, and so on. It looks at how many total accounts you have and how well you manage a wide range of credit products. Don’t worry about not having accounts in each of these categories, and don’t try to open accounts just to increase your credit mix.
Your credit score is affected by the total amount of unpaid debt you have across all of your accounts. The next most significant factor impacting your credit scores is credit usage, which is represented by your credit utilization ratio. Using more than 30% of your available credit has a negative impact on your credit score.
This factor considers the number of recent credit applications you have made. Having many new hard credit inquiries may not have a noticeable effect on your scores, but they can still negatively impact your credit score. It may appear that your economic circumstances have changed negatively if you apply for a lot of credit over a short period of time.
In addition to these factors, lease purchase solutions can also help you increase your credit score. Check out our article on how lease purchase solutions can help boost your credit score. Breeze Lease Purchase offers the best credit solutions to people living in the US for all home improvement needs. Contact us today to apply for the best solution. We will always be happy to help you.