What Determines Your Credit Score


If you’ve ever applied for a credit card, student loan, mortgage, or other type of loan, lenders take a look at your credit score and overall credit history to determine if you are a safe bet-meaning you will be able to pay back the loan.

Your credit score is a three-digit number that essentially sums up your credit history. The higher this number, the better position you will be in when it comes to getting favorable terms for a loan. A credit score is determined by five factors

  1. Payment history 35%. This is the largest portion of your credit score. Late payments, especially more than 30 days late, can have a negative effect on your score.
  2. Amounts owed 30%. Owing money isn’t a bad sign, but if you owe too much, compared to your income, that can be bad.
  3. Length of credit history 15%. Usually, the longer your credit history, the better. But, having a short history doesn’t mean you can’t get a loan.
  4. Credit mix 10%. This portion considers the types of credit accounts you have including credit cards, installment loans, and retail accounts.
  5. New credit 10%. If you’ve opened or attempted to open several new accounts recently, this can cause you to be seen as a greater risk.

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