Your Credit Score Has Five Key Factors
Most people focus on just one, but the others can drag your score down too.
1Components of Your Credit Score
65% of your FICO score comes from payment history and amounts owed. However, credit mix, length of history, and new inquiries determine the rest. Understanding all factors is key to improving your score.
2The Weight of Payment History
Payment history, which makes up 35% of your score, is the most critical factor. While paying bills on time is essential, it's not enough on its own. Other factors can significantly impact your score.
3Credit Utilization Ratio
Using more than 30% of your credit limits can lower your score. Reporting lower balances can quickly boost your score. Requesting a credit limit increase can help reduce utilization without opening new accounts.
4The Impact of Closing Old Accounts
Closing unused credit cards reduces your available credit and shortens your credit history length. Keeping accounts active with a small recurring charge is a better strategy.
5New Credit Applications
Applying for multiple credits in a short period increases inquiries and can lower your score. Spacing out applications and avoiding unnecessary loans is crucial.
6The Role of Credit Mix
Having only credit cards weakens your credit mix. Different types of credit, like auto or mortgage loans, can strengthen your score over time. Regularly check your reports to identify weak spots.
Original article: Money Crashers — Kredi Skorunuzu Etkileyen Beş Faktör