Your credit score is made up of a calculation of different factors obtained from your credit report.
When you ask, “What factors affect my credit score?”
Below are the most important points to know when considering what makes up a credit score.
1. Credit Card Utilization
This percentage is calculated by taking your total credit card balances divided by your total credit card limits. It essentially shows creditors how much of your available credit you use on average. A good rule of thumb is that lower credit card utilization rates are better.
2. Percentage of On Time Payments
This is the % of payments you’ve made on time during your credit history. It’s a factor that often weighs heavily into your creditworthiness, so just one or two late payments could negatively impact your credit score. If you have missed payments, it’s best to set up automatic bill pay or create calendar reminders for bill due dates to ensure you pay on time.
3. Total Accounts
As a general rule, the more accounts you have open, the higher the likelihood that your credit score will be good. This factor indicates that more credit cards means more lenders that have been willing to take a chance on loaning to you. Having a good mix of different types of credit is important for your overall credit health. A General rule of thumb: only open accounts that you need, not ones you want!
4. Age of Credit History
The longer your credit history and the older your accounts the better. That is why it can be a good idea to keep older credit cards open and active.
5, # of Hard Inquiries
Whenever you submit an application for credit such as a credit card, mortgage or auto loan a hard credit inquiry is started on your credit report. One hard inquiry will usually have little effect, but multiple inquiries can have a larger impact. A soft inquiry happens when you check your rate to find out what you are eligible for. When you check your rates through Nationwide Credit Clearing, this is considered a soft inquiry and won’t impact your credit score in any way shape or form.
6. Derogatory Remarks
Derogatory marks are negative and represent things such as collections, tax liens or bankruptcy. These records usually stay on your credit report for Seven to Ten years. This basically tells a lender that you may have been irresponsible in the past. Unfortunately, you have to wait out the length of time in order for it to go away.