Your credit score is a three-digit number that lenders use to assess your creditworthiness. It's based on your credit history, which includes factors such as your payment history, the amount of debt you have, and the length of your credit history. A good credit score can help you qualify for lower interest rates on loans and credit cards, while a poor credit score can make it more difficult to borrow money or rent an apartment.
Here are eight data points that can impact your credit score:
1. **Payment history:** This is the most important factor in your credit score. Lenders want to see that you have a history of making your payments on time. A single missed payment can have a negative impact on your score, so it's important to make sure you pay your bills on time, every time.
2. **Amounts owed:** The amount of debt you have relative to your available credit is another important factor in your credit score. Lenders want to see that you're not using too much of your available credit, as this can be a sign that you're struggling financially. Aim to keep your credit utilization ratio (the amount of debt you have divided by your total available credit) below 30%.
3. **Length of credit history:** The longer your credit history, the better. Lenders want to see that you have a history of managing credit responsibly. If you're new to credit, you can start building your credit history by getting a secured credit card or becoming an authorized user on someone else's credit card.
4. **New credit:** Opening new credit accounts can hurt your credit score in the short term. This is because each new credit inquiry results in a hard inquiry on your credit report, which can lower your score. If you're planning to apply for a loan or credit card, try to limit the number of new credit inquiries you make in a short period of time.
5. **Credit mix:** Lenders like to see that you have a mix of different types of credit, such as credit cards, installment loans, and mortgages. This shows that you can manage different types of debt responsibly.
6. **Negative information:** Negative information on your credit report, such as bankruptcies, foreclosures, and collections, can have a significant impact on your credit score. This type of information can stay on your credit report for up to 10 years, so it's important to address any negative information as soon as possible.
7. **Public records:** Public records, such as court judgments and tax liens, can also appear on your credit report. These items can have a negative impact on your credit score, so it's important to take steps to resolve any outstanding public records.
8. **Identity theft:** If you've been the victim of identity theft, it's important to report it to the credit bureaus immediately. Identity theft can damage your credit score, so it's important to take steps to protect yourself from this type of fraud.
By understanding the factors that impact your credit score, you can take steps to improve your score and make it easier to qualify for loans and credit cards.