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5 Things That Influence Your Credit Score

As we all know, a person’s credit score affects almost every important financial road in day-to-day life. From student loans to opening your own business, a credit evaluation will be first in line during an application process. Below are a few factors that influence your credit score.

Payment History

Everyone has bills. Phone statements, car payments and student loans being a few common monthly expenses. Paying them on time is one of the easiest and quickest ways to build a strong credit score. Your payment history is about 35% of what makes up a good score and reflects that you are reliable and make sound financial decisions.

Level of Debt

The second biggest influence on your credit is the total amount of debt you have. This means not only the monetary value of the debt, but how many open lines of credit you have as well. It is important not to have too many debts at once, as they might reflect poor decisions when it comes to your spending habits. Luckily, if you find that you need to trim them back a little, paying them off can only help your out in the long run.

Age of Credit

The age of your credit history directly deals with the date of the original line of credit and the duration it is open. Maintaining a healthy rapport with a creditor is key because it shows that you a capable of having a responsible business relationship over a long period of time. A longer history provides for a more accurate assessment of credit.

Variety of Credit

It is important to be able to manage various types of credit such as installment loans and revolving credit. Installment loans are things like car loans and mortgages. Revolving credit has an predetermined limit of money you can use, leaving it up to you to use it as you need. These are typically credit cards. It is always a good idea to do a little research before you commit to a loan/line of credit to make sure you get the best option for your lifestyle.

Hard Credit Inquiries

While checking your own credit won’t damage your score, having multiple credit institutions checking your history at once, can. Hard credit inquiries such as auto, student and business loans, when applied for all at once, will weaken your score and show financial instability. Luckily, inquiries over the last 12 months are the only ones factored into your score. This usually only affects about 10% of your score, so it won’t devastate your score.

So What Does It All Mean?

Honestly, when it comes to retaining a strong credit history, it’s pretty simple: do your research, don’t go credit-crazy and pay your bills on time. It might mean a few less 3AM Amazon shopping sprees but over-all, it will be a lot better for you in the long run. If you need any help getting your credit back on track, contact our credit repair experts for help.

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