Today, having good credit is more important than ever. With lending regulations becoming tighter, it is usual for only those with good credit to be able to obtain home loans, auto loans, credit cards, or any other lines of credit they may need.
Only those with excellent credit are able to obtain the most optimal interest rates, saving them money over the life of a loan. Greatly in need of credit repair, or seeking to prevent the need for credit repair, many Americans are left wonder, “Just what affects my credit?”
Credit is comprised of both a detailed credit report and credit scores, as reported by the three major credit agencies, using the following criteria:
- Your payment history is the most well known factor that contributes to your credit score. Its also luckily one that can sometimes be controlled by personal responsibility and planning. Paying your bills on time is essential to keep your credit score up. If you think you are going to have a problem making payments on time in the future, don’t simply avoid the issue. Contact your creditor to notify them. While this may not completely remedy the situation, it ensures you are doing all you can to work with them.
- Current debt ratio is reflected by how much credit you are using versus how much credit you have. Credit scores will drop if you consistently carry balances that nearly max out your credit limits across cards. Remember to keep as small a balance as possible on cards, and make timely payments to maximize your score.
- Remember that your credit history can affect your credit score. It generally helps to have a longer history of doing business with credit card companies. If you have zero balances on lines of credit that you have not used in years, your score could drop.
- New credit applications and types of current credit can affect your credit score. Credit scores do account for the previous 12 months worth of inquiries. If you are opening too many accounts at once, this could hurt your credit score. Some experts include that a mix of lines of credit, for instance some credit cards, a student loan, and a mortgage, rather than many similar credit cards, may be better for your credit score.