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Factors Affecting Credit Score

Factors Affecting Credit Score

Your credit score is a significant statistic that may affect your life now and in the future in ways you might not expect. Your credit score impacts the interest rates you pay on credit cards and loans, as well as whether or not you are authorized for such credit cards and loans in the first place.

Credit scores are already being used by unexpected businesses, such as insurance firms, to make choices about you. Utility providers check your credit before initiating service in your name, and some employers look at your credit history (but not your credit score) when deciding whether to offer you a job, a raise, or a promotion.

Protecting and developing your credit is more important than ever, and how you handle the five factors  listed below can have a significant impact on your credit score.


Your payment history accounts for 35% of your credit score. In fact, paying your bills on time has a greater impact on your credit score than any other factor. Charge-offs, collections, bankruptcy, repossession, tax liens, or foreclosure can all negatively impact your credit score, making it nearly hard to get accepted for anything that requires strong credit. Paying your monthly bills on time is the best thing you can do for your credit score.


Your debt level accounts for 30% of your credit score. Credit scoring calculations, such as the FICO score, include a few significant debt-related indicators. The total amount of debt you hold, the ratio of credit card balances to credit limit (also known as credit utilization), and the connection of loan balances to original loan amount.

As a general rule, maintain your credit card use at 30% or below, which means only charging up to 30% of any card’s available limit.

Having high balances or too much debt might have a negative impact on your credit score. The good news is that as you pay down your debts, your credit score will increase quickly.


How old is your oldest credit account? The age of credit accounts for 15% of your credit score and takes into consideration both the age of your oldest account and the average age of all your accounts. Having an “older” credit age is better for your credit score since it implies that you have a lot of experience handling credit. Opening new accounts or canceling old ones might reduce your average credit age. As a result, opening many new accounts at once is rarely a wise idea.


There are 2 types of credit accounts: revolving accounts and installment loans. Having both types of accounts on your credit record improves your credit score since it shows you have expertise handling several types of credit.

It’s even better if you have loans for other assets, such as an automobile or a house, in addition to credit cards and maybe a student or personal loan. However, credit types only account for 10% of your credit score, so not having a specific type of credit, such as an installment loan, would not damage your score.


When you make a credit-based application, an inquiry is placed on your credit report to reflect that you’ve made a credit-based application. Inquiries account for 10% of your credit score. One or two queries aren’t going to damage you much, but multiple enquiries, especially in a short period of time, might cost you a lot of points on your FICO score. To protect your credit score, keep your applications to a minimum.

The good news is that only inquiries made within the past 12 months are included for calculating your credit score.  Inquiries will be removed from your credit record after 24 months. It is important to note that checking your own credit report results in a “soft” query, which has no effect on your credit score.

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