The Top Factors that Determine Your Credit Score
Your credit score is one of the biggest factors that lenders use to decide whether to approve you for a loan, so having a good score is crucial. Credit scores range from 300 to 850, with a score above 700 considered good, and it's determined by your credit history, which is made up of five factors.
The two smallest factors are how much new credit you have and whether you have a variety of types of credit, which make up 10% of your score each. If you've recently applied for several new lines of credit, your score will go down. A variety of types of credit like a mortgage, installment plans, and credit cards, as opposed to just having a few credit cards, boosts your score.
Making up 15% of your credit, length of credit history is another minor factor in determining your score. The longer you've been building credit, the more trustworthy you are to lenders. Unfortunately, there's nothing you can do to make this part go up faster-you just have to wait.
The next highest is amounts owed, which is 30% of your score. The more total debt you have, the lower your score will be. High credit card balances and a large amount still owed on installment loans will negatively impact your score.
Finally, the biggest factor in determining your score is payment history. At 35% of your score, payment history is the number one thing lenders look at when deciding if you're reliable enough to make your monthly payments. Missing payments and having past due amounts will kill your score.
Building credit is a process, but you can do it if you take these factors into account when planning your budget. So if you have any questions for our Finance Department stop on by or contact Parks Select today!