A credit score is comprised of five different factors, and each factor affects your score differently. The factors are listed below:
1. Payment history (35%) – This is the largest factor in your credit score. A long history of paying on-time has a very positive impact on your score. Conversely, late payments have a significant negative effect.
2. Amounts owed (30%) – This is sometimes referred to as “credit utilization ratio.” In other words, how much of your available credit are you using? If most of your credit is being used, lenders may consider you to be “over-extended.” The more available credit an individual has, the higher their credit score.
3. Length of credit history (15%) – The longer you have a history of being a good borrower and repayor, the higher your score will climb.
4. Credit mix (10%) – Credit scores consider the different types of credit a person has (i.e. a mortgage, credit cards, auto loans, etc.) Some types of credit are considered to carry more risk than others.
5. New credit (10%) – Several new credit accounts in a short period of time often prove to be a risk, thereby decreasing an individual’s score.
