Your credit score plays a big role in your financial life. It affects your ability to get loans, credit cards, and even a new apartment. But what actually goes into your credit score? In this blog, we’ll break down the five key factors that affect your credit score and share easy tips to help you improve it.
1. Payment History (35%)
This is the most important factor in your credit score. Lenders want to know if you pay your bills on time.
- What it means: A record of your past payments on loans, credit cards, and bills.
- How to improve:
- Always pay at least the minimum amount due.
- Set up automatic payments or reminders.
- Catch up on any missed payments as soon as possible.
2. Credit Utilization (30%)
Credit utilization is the percentage of your available credit that you’re using.
- What it means: If you have a $10,000 limit and use $3,000, your utilization is 30%.
- How to improve:
- Keep your credit utilization below 30% (ideally under 10%).
- Pay down balances regularly.
- Ask for a credit limit increase if possible—but don’t increase your spending.
3. Credit History Length (15%)
The longer you’ve had credit, the better it is for your score.
- What it means: The age of your oldest account, your newest account, and the average age of all accounts.
- How to improve:
- Keep older accounts open, even if you don’t use them often.
- Avoid opening too many new accounts in a short period.
4. Credit Mix (10%)
Having different types of credit shows you can handle various kinds of debt.
- What it means: A mix of credit cards, auto loans, mortgages, and other accounts.
- How to improve:
- If you only have one type of credit, consider adding another (like a small personal loan).
- Don’t open new accounts just for this purpose—only when necessary.
5. New Credit Inquiries (10%)
Every time you apply for new credit, a hard inquiry is made, which can temporarily lower your score.
- What it means: Lenders check your credit when you apply for a loan, credit card, or other financial product.
- How to improve:
- Limit the number of new credit applications.
- Shop for rates within a short window when applying for a mortgage or auto loan (credit bureaus count these as one inquiry).
Understanding these five factors can help you make smarter financial decisions. By paying on time, managing your credit usage, and being mindful of new accounts, you can improve your credit score over time.
Need help improving your credit? At Smoov Credit, we help individuals repair and rebuild their credit with proven strategies.
💳 Ready to take control of your credit? Contact us today for a free consultation!