Credit scores are determined by what type of credit you have. This "credit mix" is also known as your credit score. One can have "good credit", which is mortgages, or "bad credit," which is high-interest credit cards and payday loan. It's important to understand how credit can affect your score.
Credit history length
The length of your credit history is an important factor when it comes to your credit score. Credit scoring companies calculate this figure and it's the average age of all your credit cards. Your score will increase the longer you have had a good credit record. You don't need to have good credit if you have a poor credit history. It is possible to build a strong credit history by paying on time and avoiding late payments.
The length of your credit history is one of the five major factors that impact your score. It is right at the middle of the list, just behind your age and how much credit you use. Your credit history should be longer, but you also need to consider other factors. An average score for people with excellent credit is 711; a longer credit track can help you maintain a great score.
Payment history
Credit scores are influenced by your payment history. Lenders use this score to make lending decisions. If you make a lot of late payments, your score will suffer. In order to raise your score, make sure you pay your bills on time and in full.
Your payment history reveals which accounts you were responsible for and when. This information represents 35% to your credit score. Lenders use it to decide if you can repay a credit card or loan. Lenders prioritize your payment history because it tells them how likely you are to pay your debts. However, it is important to note that one or two late payments will not automatically hurt your score. Positive payment history can be more important than late payments.
Credit utilization
Pay attention to credit utilization ratio. It is one of many important factors that affect credit scores. It can reveal whether you are a high spending person or a low threat customer. This will help increase your chances for getting approved for loans. As a general rule, you should aim to use less than 30 percent of your available credit limit on revolving accounts. Your balances should be paid every month. Check your credit score online for a better understanding on your credit utilization.
The higher your credit utilization, the lower your credit score. One way to increase your credit score is to have a free balance on your credit card. Your credit utilization ratio can be affected if your credit card balance is high. Your score can be improved by paying your balances on a timely basis.
Credit utilization doesn't take into account collections
Your credit score is a function of how well you manage your credit. It informs the scoring model about how well you manage your credit. High credit utilization could hurt your score. It is best to keep your credit utilization under 30%. Credit utilization can be affected by many factors. For example, you might have too many credit cards or too few loans.
Remember that credit card debt represents a small portion of your total credit limit. If you only use a small amount of your credit, collections should not be a concern. Even if you have many high-limit cards, your total utilization ratio should not exceed 30%. This will allow you to have thousands of dollars in available credit.
VantageScore
A VantageScore is affected by your payment history. This shows lenders that you can manage multiple types of credit responsibly. It will decrease your credit utilization, and improve your score. It's a good idea for your oldest credit accounts to be open and in good standing.
VantageScore takes into account several factors such as your payment history and total debt. The percentage of total debt you owe and your payment history account for 35% of the score. Credit utilization is also important. It's a good idea for balances to be 30% or less than your credit limit.