Understanding Your Credit Score – Part 1

Do you know how your credit score is calculated? A credit score is based on a number of factors such as the number of open accounts you have, the total amount of debt you carry, your credit utilization — or the percentage of your available credit you use, and your repayment history, among others. Let’s drill a little deeper and look at the three most important factors of your score:

Payment History: 35%

The biggest concern lenders have when making a loan is whether they will get their money back, so your payment history has the greatest impact on your credit score. Things that can detract from your payment history are making late payments — and how late those payments were, if any of your accounts required a collections agency to capture missed payments, if you have any debt settlements, bankruptcies, etc., as well as how recent the last negative event took place and how frequent missed payments occur. Note that your payment history goes back seven years; anything older than that is wiped clean.

Amounts Owed: 30%

Making your payments on time is great – as long as you’re not overwhelmed by the amount you owe. Having a $0 balance on your accounts is certainly not necessary, as owing a little bit shows lenders that you are responsible and making your payments on time. It’s also beneficial to have a mix of different types of credit that you manage responsibly – like student loans, auto loans and credit cards.

 Length of Credit History: 15%

A longer credit history can be helpful, as long as it’s not marked by missed payments – but if you’re new to having credit, that’s okay too as long as you are making payments on time and don’t have a huge amount of debt. One tip some finance experts offer is to leave credit card accounts open, even if you don’t use them anymore, because having a long-standing credit account in good standing will help boost your score.


As a renter, you can nurture your credit score by having your on-time rent payments reported to the credit bureaus with a solution like RentReporters. Find out more at https://www.rentreporters.com/price/.

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