Our credit report is essentially a financial report card. But, where does that information come from and how does it impact our overall credit score? The following are the five most important things that make up a credit score:
Payment history: 31 percent. Paying bills on time helps avoid late fees and keeps our credit scores higher.
Level of debt: 30 percent. It’s not a good idea to use up all our credit. Using most of our credit, or hovering close to our credit limits negatively impacts our score.
Length of credit history: 15 percent. How well do we manage our credit accounts over time? Having a longer credit history helps our score.
Types of credit: 14 percent. Showing that we have a record of paying different types of debt helps our credit score. A healthy mix of credit includes credit cards, home loans and auto loans.
New credit: 10 percent. Having lots of credit inquiries within a short period of time lowers our score as it indicates that we may be actively searching for more credit. This makes lenders nervous. However, when we just check our own credit or when an employer does, it does not impact our score.
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