Breaking Down Your Credit Score

Lending, Personal Finances

Credit scores are important because they can impact what kind of loans you qualify for and what interest rate you receive. A credit score may seem like just an arbitrary number, but it is actually based on several important factors.

What makes up my credit score?

35% Payment History

This is the biggest factor in determining your credit score. Late payments may lead to a lower score. Make sure to pay at least the minimum payment on any loans or credit cards you have to keep your payment history clean.

30% Amounts Owed

Your credit score will be affected by how much you owe versus how much available credit you have. Paying down loans and credit cards can help increase your score.

15% Length of History

A long history of credit is good for your credit score! Determining factors include how long your credit accounts have been open, the age of your oldest account, and the average age of all your credit accounts. It’s best to not open a lot of new loans or credit cards at once and to keep your oldest credit cards open.

10% New Credit

New Credit includes how many new accounts you have opened and how many credit inquiries you have. A credit inquiry is usually pulled when you apply for a new credit card or loan. Having a lot of inquiries in a short period of time can lower your score.

10% Types of Credit Used

The number and types of credit accounts you have can impact your credit score. It can help to have different types of credit such as a mortgage versus a credit card.

Where can I find my credit score?

You can view your full credit report for free online at AnnualCreditReport.com. This website is authorized by federal law and allows you to see your report for free once every 12 months from each of the three credit reporting agencies: TransUnion, Equifax, and Experian. While this will show your current credit information and your credit history, it will not give you a score; but it is a good place to start to make sure everything is accurate, and there is no fraudulent activity. You can purchase your credit score from any of the three credit reporting agencies, or you can often get your credit score for free from your credit card provider.