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What Has The Highest Impact On Your Credit Score?

What Has The Highest Impact On Your Credit Score?

It’s likely that you may have looked in your credit score before and there are several factors that come down to calculating a credit score. If you’ve never considered how your credit score is calculated, one of the largest factors that could be impacting your credit score is likely your payment history. Payment history and paying your bills on time can account for up to 35% of your FICO credit score. A secondary aspect of your credit score calculation comes down to your utilization ratios for credit. The amount of credit products that you’re using will account for around 30% of your credit score and the remaining percentage of your credit score comes down to the length of your credit history, the mix of your financial products, and any new credit accounts that you have. Your credit history really comes down to the financial decisions that you’re making and an assurance that you are going to be responsible and pay on time with your credit products. This article will explain what has the highest impact on your credit score.

Why Payment History Is So Important To Credit Score

Payment history is so important to your credit score because it will ultimately determine the risk level that a creditor may have in using your company. It’s likely that if a friend asked for money and then was very late to pay it back, you would be less likely to lend the money in the future. This is the exact reason why your credit reporting also takes into account your promptness with payments. A credit score needs to be an accurate depiction of the credit history of somebody applying for a financial product. 

Late And Missed Payments

Late and missed payments will persist on your credit report and be affected for up to seven years after the missed payment takes place. The negative impact on your credit score will decrease over time so this means that if you are able to change your habits and continue to make payments on time, you will be able to slowly recover points on your credit score. If you’re more than 30 days late on a payment, this can have the greatest effect on your credit score. If you’re making payment 60 days late, this will often have a greater effect than a payment that’s 30 days late or 90 days late. Making corrections to delinquencies on your financial accounts as soon as possible is the best way to avoid credit problems. 

Will Bills Affect Payment History?

Your payment history will be affected by your bill payments. Understanding what a bill in tales comes down to almost every type of financial product that you have. Almost any payment will be included on your credit report including payments you have for auto and vehicle loans, mortgages, credit cards, personal loans and more. Qualifying for these services and then regularly paying your bills on time can be an excellent way to continue to boost your credit score. 

The Other Factors

Your credit utilization can play one of the biggest roles and affect your credit score. Keeping your usage ratio for credit products to a minimum is usually the best option. Your credit utilization rate means not carrying a next or credit card balance or carrying extra debt. If you’re using more than 30% of the credit that you qualify for at any one time, you could continually hurt your credit score. 

Make sure that you keep the credit card account open wherever possible as the history of your credit card account will make up to 15% of your credit score. The different types of credit products that you carry will also affect up to 10% of your credit score. Keeping a good mix of credit and making those payments on time is usually the best way to have greater security. 

If you would like to learn more about improving your credit score and maximizing your credit for the future, contact us today.