07/06/2023
📢 Hey everyone! 💬 Ever wondered what goes into determining your credit score? 📊🔍 Let's dive into the key factors that make up this crucial financial metric. Here's a breakdown of what influences your credit score: 📋
1️⃣ Payment History: Weight: 35%
Payment history defines how consistently you've made your payments on time. This is the most important contributor to your credit score.
2️⃣ Amounts You Owe: Weight: 30%
The amounts you owe is the outstanding debt you currently owe. The lower the amount of outstanding debt, the higher the credit score.
3️⃣ Length of Your Credit History: Weight: 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.
4️⃣ New Credit You Apply For: Weight: 10%
Also known as credit inquiries, 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.
For example, if you're shopping for a car and apply for financing at three different car dealerships, your score will not decrease three times; it will only decrease once during the shopping window. That could vary depending on the type of loan you're seeking and the credit scoring model used.
Note that inquiries will affect your credit even if you're denied or ultimately decide against the loan or credit card. Each inquiry affects most people's score by less than 5 points and can stay on your report for up to 24 months.
5️⃣ Types of Credit You Use: Weight: 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.
Remember, your credit score influences loan approvals, interest rates, and even rental applications. Maintaining a positive credit score is key to financial success! 🌟
