What impacts your credit score?
I’m jotting down points on financial insights I’ve acquired, aiming to deepen my understanding of the subject.
Credit score = creditworthiness. This score impacts everything related to buying a house, a car, or taking a huge loan, etc. Credit scoring models may vary, but common factors that can influence and change a credit score include:
- Payment History: History of making payments on time. Late/missed payments can have a negative impact.
- Credit Utilization: Amount of credit used vs total available credit. Credit usage should be less than 30%. Higher credit limits can positively affect your credit score and help in keeping usage % low.
- Credit History Length: Length of time you’ve had credit accounts. Longer credit histories have a positive effect.
- Types of Credit: Having a diverse mix, such as credit cards, installment loans, and retail accounts, can be viewed positively.
- New Credit Inquiries: Each time you apply for new credit, a hard inquiry is recorded on your credit report. Too many inquiries within a short period may indicate higher risk and can lower your score.
Other factors like excessive debt, frequent balance transfers, bankruptcies & opening multiple new credit accounts rapidly can also impact your credit score. Be mindful and utilize credit cards to your advantage!
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