Are you trying to buy a house but your credit score is in the dumps?

You need to crawl out of this hole, but it’s hard to know where to begin. It’s possible you’re not even sure how you got into this mess in the first place. 

To figure out how to build or rebuild good credit, you have to understand how the system works. There are some actions you can take that will change your score more than others. 

Whether you want to take out a loan, buy a car or finally have a home all your own, you need a good credit score. We take a look at the key factors and what most influences your credit score.

1. Paying on Time 

The five factors that influence your credit do not carry equal weight. Your payment history counts for 35% of your score. It’s the most important aspect. 

When you pay late, that will affect your score. If you are consistently missing paying your monthly minimum, you’re going to be in big trouble. 

Even if you’re in tons of debt, paying the minimum every time will really help your score.

2. How Much You Owe

The amount of debt you owe is 30% of your score. Basically, what they factor in is how much credit you have versus how much of that credit is used. 

The less credit you use of the credit you have, the better. But the key is, you have to have the credit available to you. This is because it affects the next factor. 

3. Age of Your Credit 

The older your credit cards or other credit lines are, the better. This accounts for 15% of your score. 

First, if you don’t have a credit history, that’s almost as bad as having a bad credit score. You might have no debt, but there’s also no evidence that you can handle having credit. 

If you don’t have any credit, get a credit card right now. You can read more here to find out about fair credit cards. 

4. Credit Inquiries 

These last two factors each account for 10%. Every time you apply for a line of credit or loan, that is a credit inquiry. 

That will negatively affect your score. However, if you don’t do it that often and every other factor is in good shape, it’s effect will be offset. 

5. Mix of Credit

If you have more than one type of credit line, that will help your score. It shows lenders you can successfully manage the task of juggling both at once. 

There are two types, revolving and installment credit. Meaning, having two credit cards won’t count. You need something like a student loan or personal loan along with a credit card. 

What Most Influences Your Credit Score: The Takeaway

Now that you know what most influences your credit score, you can start on the path to fixing your credit. It won’t happen overnight, but you will be surprised at how fast it can start to improve. 

Did you like this article and want to learn more ways to get your finances back on track? Then check out this blog with tips on how to save in 2019

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