Your credit score is a three-digit number that can define you financially. A good credit score can make it possible to buy your dream home or open a business, while a bad score can present challenges. To build or maintain a credit rating that will allow you to reach your goals, it can be helpful to understand what affects your credit score. Here are some tips to help you learn how the system works: 

The formula

Credit scores can be as low as 300 and as high as 850. There are five factors that determine where your number falls in that range:

  • 35% of your score is based on your payment history
  • 30% is based on current debts
  • 15% is determined by credit history
  • 10% is allotted to new credit applications
  • 10% is about types of current credit


Carrying high credit card balances can decrease your credit score.

Payment history

Skipping payments or paying your credit card late can quickly damage your credit score. And it can take up to seven years to get a hit, ten years for certain items, off of your record. If you pay all of your bills and credit card balances in full and on time, your history will remain clean, resulting in a higher score.

Current debts

Carrying high balances – relative to the total credit limit – on several cards could indicate a greater risk of default and bring down your score.

Credit history

This isn’t just impacted by how long you’ve had access to credit. It also takes trends in payment patterns and credit applications into account. So, while having a long history of good credit can boost your rating, a habit of missing payments or applying for new credit can dramatically decrease your score.

Types of current credit

Having a mix of credit products, such as a mortgage, a car loan, a home equity loan, and one or two credit cards is considered healthier than having multiple credit cards. Striking the right balance between types of credit can improve your credit score.

With this information, you can make informed choices that will help you make the most of your score. And the higher the score, the better your chance of getting the credit you need.

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