Understanding Your Credit Score
Your credit score is a three-digit number, typically ranging from 300 to 850, that represents your creditworthiness. Lenders use this score to determine the likelihood that you will repay your debts on time. A higher score means you are considered a lower risk, which can lead to better interest rates and loan terms.
The 5 Factors That Make Up Your Score
Payment History (35%)
The most important factor. Consistently paying bills on time boosts your score, while late payments, bankruptcies, and collections hurt it.
Amounts Owed (30%)
Also known as credit utilization. It's the ratio of your current revolving debt to your total available credit limit. Keep this below 30%.
Length of Credit History (15%)
Considers the age of your oldest account, newest account, and average age of all accounts. Older is better.
Credit Mix (10%)
Lenders like to see that you can handle different types of credit, such as credit cards, auto loans, and mortgages.