Smart Strategies to Improve Credit Score

Credit Score Factors Breakdown

Credit Score Factors Breakdown | Understanding Your Credit Score

Credit Score Factors Breakdown

Payment History (35%)

Your payment history is the most important factor in your credit score. It shows whether you’ve paid past credit accounts on time.

How to Improve:

  • Always make payments on time
  • Set up automatic payments or payment reminders
  • If you’re behind, get current and stay current

Credit Utilization (30%)

This refers to the amount of credit you’re using compared to your credit limits. Lower utilization is better for your score.

How to Improve:

  • Keep your credit card balances low
  • Pay off debt rather than moving it around
  • Keep unused credit cards open

Length of Credit History (15%)

This factor considers how long your credit accounts have been established, including the age of your oldest account, the age of your newest account, and an average age of all your accounts.

How to Improve:

  • Keep old accounts open and active
  • Avoid opening too many new accounts in a short period
  • Be patient – this factor improves naturally over time

Credit Mix (10%)

This factor looks at the variety of credit accounts you have, including credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans.

How to Improve:

  • Have a mix of credit types over time
  • Don’t open accounts you don’t need just to have a better credit mix
  • Apply for and open new credit accounts only as needed

New Credit (10%)

This factor considers how many new accounts you have, how many recent inquiries, and how long it’s been since you opened a new account.

How to Improve:

  • Avoid opening multiple credit accounts in a short period
  • Be cautious about allowing multiple hard inquiries on your credit report
  • When rate shopping for a loan, do so within a focused period to minimize the impact

Additional Factors to Consider

While not directly part of your credit score, these factors can influence your overall creditworthiness:

  • Income: While not part of your credit score, lenders may consider your income when making credit decisions.
  • Employment History: Stable employment can be viewed favorably by lenders.
  • Debt-to-Income Ratio: This ratio compares your monthly debt payments to your monthly income and is often considered in loan applications.

Tips for Improving Your Credit Score

  • Review your credit reports regularly and dispute any errors
  • Set up automatic payments to ensure you never miss a due date
  • Keep your credit utilization below 30%, and ideally below 10%
  • Don’t close old credit accounts, even if you’re not using them
  • Limit applications for new credit
  • Consider a secured credit card if you’re building or rebuilding credit
  • Be patient – improving your credit score takes time

Monitoring Your Credit

Regularly monitoring your credit is crucial for maintaining a good credit score and detecting potential issues early.

  • Get your free annual credit reports from AnnualCreditReport.com
  • Consider using a free credit monitoring service
  • Review your credit reports for errors or signs of identity theft
  • Set up alerts for significant changes to your credit report
Skip to content