The 5 Key Factors Affecting Your Credit Score & Proven Strategies to Improve It
Written by: RIC Staff
November 13, 2024
Topics: 5 Key Factors Affecting your score.
The 5 Key Factors Affecting Your Credit Score & Proven Strategies to Improve It
Written by: RIC Staff
November 13, 2024
Topics: 5 Key Factors Affecting your score.
Long-Term Strategies to Boost Your Credit Score
When it comes to credit, we all want a score that opens doors, not one that holds us back.
But what exactly drives that score?
Let’s break down the five main credit score factors and share actionable tips you can use right away to boost each one.
Whether you’re aiming to DIY or want a bit of help along the way, understanding these five factors will give you the control and insight to improve your score.
1. Payment History (35% of Your Score)
Why It’s Key: Think of your payment history as your credit score’s “track record.” Paying bills on time shows lenders you’re reliable, and this factor alone makes up the largest portion of your score.
Pro Tip: Automate your payments. By now we understand a SINGLE late payment can affect your score for months on end. Set up reminders or enroll in autopay to ensure your payments go through on time, especially for high-interest accounts.
Late payments can feel like they stick around forever, but with persistence, they’ll fade over time.
Over time, as those balances reduce, you’ll feel the benefits on both your score and your wallet.
Credit Fix Tip: If you’re tackling overdue bills,
prioritize high-interest accounts first.
2. Credit Utilization (30% of Your Score)
Why It’s Key:
Utilization is the percentage of your available credit that you’re actually using. Using too many signals to lenders that you might be financially stretched.
Pro Tip:
Aim to keep your credit utilization under 30%, but if you really want to push your score higher, aim for under 10%. For example, if you have a total credit limit of $10,000, keep your balance under $3,000.
If your balances are creeping up, consider paying down high-interest cards first to free up credit and lower your utilization faster.
Credit Fix Tip: Look for options like balance transfers to low-interest cards or request a credit limit increase. Both options can lower your utilization ratio without additional payments.
3. Length of Credit History (15% of Your Score)
Why It’s Key: The length of your credit history helps lenders see your experience managing credit. A longer credit history usually signals stability.
Pro Tip: Keep older accounts open—they contribute positively to the length of your credit history, which can improve your score over time.
If you’ve paid off a credit card, consider keeping it open and using it occasionally for a small, manageable expense.
Credit Fix Tip: Avoid closing old accounts, even if they’re not in active use. If you’re concerned about potential fraud on older, unused accounts, just put a small recurring charge on them and pay it off every month to keep the account active.
4. Credit Mix (10% of Your Score)
Why It’s Key: Lenders want to see a well-rounded credit profile with a mix of credit types, such as credit cards, auto loans, and mortgages.
A variety in credit types shows lenders that you can manage multiple financial obligations.
Pro Tip: If you’re lacking variety in your credit profile, consider adding a new credit type, like a small personal loan or secured credit card, to diversify. Just remember not to take on more credit than you can manage comfortably.
Credit Fix Tip: Building a stronger credit mix doesn’t mean you need to go all out on new loans. A secured card or credit-builder loan can be an affordable way to add diversity without racking up too much new debt.
5. New Credit Inquiries (10% of Your Score)
Why It’s Key: Every time you apply for credit, a “hard inquiry” appears on your report. A few inquiries won’t do much harm, but too many in a short period can signal that you’re in financial distress.
Pro Tip: Space out credit applications, especially if you’re planning a major financial decision, like a home or car purchase. New credit inquiries only account for a small portion of your score, but avoiding unnecessary applications helps keep your score steady.
Credit Fix Tip: When considering new credit, ask lenders about their pre-qualification process. Many lenders now offer a soft-pull check to see if you’re likely to qualify without impacting your score.
How to Prepare for Big Financial Decisions...
Whether you’re saving for a house, financing a car, or considering a loan, improving your credit score first can save you thousands in interest over time.
The key to preparing for these decisions? Get proactive. Pull your credit report, look for any negative marks, and start addressing them well before you apply for new credit.
You can leverage a credit monitoring service, such as MyFreeScoreNow, for an accurate picture of your credit status.
Avoid apps that provide only a partial look, like Experian or Credit Karma, and stick with services that offer a thorough breakdown of each item on your report.
If you find errors or inaccuracies, don’t hesitate to address them head-on.
You can craft dispute letters using tools like ChatGPT or professional assistance if you prefer to speed up the process.
Just remember, whether you go the DIY route or seek professional support, clear, organized documentation (proof of address, copies of inaccuracies, etc.) is critical for dispute success.
Get Your Complimentary Session With A Credit Expert Today.
Long-Term Strategies to Boost Your Credit Score
When it comes to credit, we all want a score that opens doors, not one that holds us back.
But what exactly drives that score?
Let’s break down the five main credit score factors and share actionable tips you can use right away to boost each one.
Whether you’re aiming to DIY or want a bit of help along the way, understanding these five factors will give you the control and insight to improve your score.
1. Payment History (35% of Your Score)
Why It’s Key: Think of your payment history as your credit score’s “track record.”
Paying bills on time shows lenders you’re reliable, and this factor alone makes up the largest portion of your score.
Pro Tip: Automate your payments. By now we understand a SINGLE late payment can affect your score for months on end. Set up reminders or enroll in autopay to ensure your payments go through on time, especially for high-interest accounts.
Late payments can feel like they stick around forever, but with persistence, they’ll fade over time.
Over time, as those balances reduce, you’ll feel the benefits on both your score and your wallet.
Credit Fix Tip: If you’re tackling overdue bills,
prioritize high-interest accounts first.
2. Credit Utilization (30% of Your Score)
Why It’s Key: Utilization is the percentage of your available credit that you’re actually using. Using too many signals to lenders that you might be financially stretched.
Pro Tip: Aim to keep your credit utilization under 30%, but if you really want to push your score higher, aim for under 10%. For example, if you have a total credit limit of $10,000, keep your balance under $3,000.
If your balances are creeping up, consider paying down high-interest cards first to free up credit and lower your utilization faster.
Credit Fix Tip:
Look for options like balance transfers to low-interest cards or request a credit limit increase. Both options can lower your utilization ratio without additional payments.
3. Length of Credit History (15% of Your Score)
Why It’s Key: The length of your credit history helps lenders see your experience managing credit. A longer credit history usually signals stability.
Pro Tip: Keep older accounts open—they contribute positively to the length of your credit history, which can improve your score over time.
If you’ve paid off a credit card, consider keeping it open and using it occasionally for a small, manageable expense.
Credit Fix Tip: Avoid closing old accounts, even if they’re not in active use. If you’re concerned about potential fraud on older, unused accounts, just put a small recurring charge on them and pay it off every month to keep the account active.
4. Credit Mix (10% of Your Score)
Why It’s Key: Lenders want to see a well-rounded credit profile with a mix of credit types, such as credit cards, auto loans, and mortgages.
A variety in credit types shows lenders that you can manage multiple financial obligations.
Pro Tip: If you’re lacking variety in your credit profile, consider adding a new credit type, like a small personal loan or secured cre
Credit Fix Tip: Building a stronger credit mix doesn’t mean you need to go all out on new loans. A secured card or credit builder loan can be an affordable way to add diversity without racking up too much new debt.
5. New Credit Inquiries (10% of Your Score)
Why It’s Key: Every time you apply for credit, a “hard inquiry” appears on your report. A few inquiries won’t do much harm, but too many in a short period can signal that you’re in financial distress.
Pro Tip: Space out credit applications, especially if you’re planning a major financial decision, like a home or car purchase.
New credit inquiries only account for a small portion of your score, but avoiding unnecessary applications helps keep your score steady.
How to Prepare for Big Financial Decisions...
Whether you’re saving for a house, financing a car, or considering a loan, improving your credit score first can save you thousands in interest over time.
The key to preparing for these decisions? Get proactive.
Pull your credit report, look for any negative marks, and start addressing them well before you apply for new credit.
You can leverage a credit monitoring service, such as MyFreeScoreNow, for an accurate picture of your credit status.
Avoid apps that provide only a partial look, like Experian or Credit Karma, and stick with services that offer a thorough breakdown of each item on your report.
If you find errors or inaccuracies, don’t hesitate to address them head-on.
You can craft dispute letters using tools like ChatGPT or professional assistance if you prefer to speed up the process.
Just remember, whether you go the DIY route or seek professional support, clear, organized documentation (proof of address, copies of inaccuracies, etc.) is critical for dispute success.
Get Your Complimentary Session With A Credit Expert Today.
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We Help Everyday People Repair Their Credit
Office: Fullerton, CA 92832