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Are you trying to boost your credit score but aren’t quite sure how to do it?
If you have bad credit, you’re certainly not alone. A recent study found that 30% of Americans have bad or poor credit. Your credit score isn’t just a random number.
Credit scores can affect your everyday life in many ways. It can affect your mortgage rates, insurance rates, and interest rates. Depending on the industry you work in, it can even affect whether or not you get a job.
In many cases, you also need a good credit score to rent an apartment, get a cell phone, and set up utility accounts. To boost your score, you first need to understand what factors are affecting your credit.
Read below to find out the top five factors that affect your credit score.
1. Payment History
Perhaps the most important factor affecting your credit score is your payment history. If you have a long-time history of on-time payments, then your credit score will rise.
Even missing a single payment could have an impact on your credit score. Plus, the effects tend to worsen the longer the bill goes unpaid. How much the late payment will affect your credit score will depend on how much you owe.
If you really struggle with making on-time payments, you could even end up with a public record. These penalties could end up on your credit report and knock your score down.
If you struggle to make payments on time, one of the best things to do is to set up auto-payment. This way, you never have to worry about keeping track of when different bills are due or missing a due date.
2. Credit History Length
Another element that can impact your credit score is your length of credit history. This includes the following:
- The average age of your accounts
- The oldest account’s age
- The newest account’s age
- Whether you’ve used your accounts recently
When you open a new account, it could lower your average age, which may have an impact on your credit score. Avoid opening new accounts unless absolutely necessary. If you have a long-standing account, keep it open. Over time, it’ll hopefully help boost your credit score.
3. Credit Usage
The third important factor to take into consideration is credit usage. This is one of the few factors that you can change quickly to improve your credit health.
The biggest thing to take into consideration is your credit utilization rate. The utilization rate describes the ratio between your total credit limit and the balance you owe on all of your credit accounts.
If you can lower your utilization rate (i.e., pay down your credit cards), you should see a boost in your credit score. You can click here to learn more about increasing your credit score.
Time to Boost Your Credit Scores
Now that you know what affects your credit score, it’s time to work on boosting it. As we mentioned, credit scores can have a huge impact on daily life, so take care of your credit now before things get out of hand.
If you’re interested in learning more about credit and other financial tips, check back in with our blog.