Factors That Impact Your Credit Score

Your credit score is the foundation of your financial stability. In the eyes of lenders, your credit score depicts your financial responsibility. However, one does not simply get good credit. You must earn it, and that takes time, discipline, and effort. Consumer debt is inevitable in a financial portfolio. How well you manage it is what is depicted in your credit score. 

ABC’s of Your Credit Score

Your credit score is determined by how responsible you are using credit. The two most common types of credit scores are the FICO Score and VantageScore.

According to the FICO model, a “good” credit score will be somewhere between 740 and 799. As for VantageScore, a “good” credit score can be as low as 700 and up to 749.

Your credit score can look different coming from different credit bureaus. This happens because sometimes, not all lenders report to the credit bureaus. Also, each agency may update client information at different times.

So what is considered a good credit score? According to FICO this is what it should be.

• 300-579: Very Poor
• 580-669: Fair
• 670-739: Good
• 740-799: Very Good
• 800-850: Exceptional

Factors that Impact Your Credit Score

1. Payment history (about 35% of the score) – making payments consistently on time indicates responsibility. If you are late on payments or miss them, your score will be impacted by how late the payments are, how much you owe, how recently they were late, and how often lateness occurs. It’s best to keep your credit utilization at 30% or less.
2. Amounts owed on credit accounts (about 30% of the score) – Also known as credit utilization.
3. The length of credit history (about 15% of the score)- You should have both revolving accounts (like credit cards and credit lines) and installment accounts (like an auto loan, mortgage, and personal loan).
4. New credit (about 10% of the score) – This looks at how many new accounts you have opened in relation to the total amount of accounts in your credit file.
5. Types of credit (about 10% of the score) – The longer you’ve maintained credit accounts well, the more trustworthy you appear.
6. A longer credit history generally increases the score