What impacts your credit score?

I’m jotting down points on financial insights I’ve acquired, aiming to deepen my understanding of the subject.

Photo by Paul Felberbauer on Unsplash

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:

1. Payment History: History of making payments on time. Late/missed payments can have a negative impact.
2. 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.
3. Credit History Length: Length of time you’ve had credit accounts. Longer credit histories have a positive effect.
4. Types of Credit: Having a diverse mix, such as credit cards, installment loans, and retail accounts, can be viewed positively.
5. 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!

P.S: If you found this blog useful,

• 💬 Comment or give me a follow! I’ll follow back and let’s build a community of writers!
• 📖 Subscribe for my future blogs.
• ☕ Buy me coffee! :D
• 🔗 Connect on LinkedIn or Instagram.

📝 You might also like: Master Budgeting: 2 Essential Digital Apps