Lenders and financial institutions use credit scores to determine whether to grant you loans or credit cards, as well as what terms you’ll receive.
Credit scores are based on information in your credit report, and key 휴대폰소액결제현금화 factors include payment history, amounts you owe (known as credit utilization), how long you’ve had credit and the types of accounts you have.
Payment History
Payment history is a major factor in credit scoring models and demonstrates your reliability to pay debts on time. This includes a detailed record of whether your payments were made on time, how late they were and the amount owed relative to how much credit you have available, which is known as credit utilization.
Other important factors include the length of your credit history, the types of accounts you have (revolving and installment such as credit cards and mortgage loans), and the total amount owed. Public records, such as bankruptcies and collection items, can also impact your credit score.
Keeping up with repayments and avoiding late payments is the easiest way to raise your credit score. However, even if you are on track to pay off your debts on time, other parameters in your credit profile may still cause your score to drop if you violate them in the future. This is why it’s so important to regularly check your credit report for errors.
Length of Credit History
Length of credit history accounts for around 15% of your credit score. This isn’t a huge factor in comparison to other important factors like your payment history and credit utilization, but it can still make or break your scores. If you have a long history of responsible credit use, lenders will be more willing to lend you money because they’ll have a thorough track record to review. However, opening or closing new accounts can cause your average account age to drop and may negatively impact your credit score in the short term.
It’s important to maintain old accounts (especially revolving credit cards with no annual fees) so that they continue to contribute to your overall account age and credit history. Closing revolving credit accounts with a good payment history can hurt your credit score, so you should only close accounts that have an annual fee or are no longer needed. Limiting how often you open new credit accounts is also beneficial to your credit score.
Types of Credit Accounts
Credit scoring models consider your mix of credit accounts, or how diversified you are with different types of credit, to be one of the five major components in determining your score. It accounts for about 10% of your overall credit scores. Lenders want to see that you can manage both revolving accounts, like credit cards, and installment loans, such as auto loans or mortgages.
Having a mixture of these accounts can help your credit scores, but not if you don’t use them wisely or have a history of late payments. It’s also important to remember that not all credit accounts are reported to the credit bureaus, including utility and cell phone bills.
Credit cards are the most common type of credit account, and they are revolving credit that allow you to borrow up to your limit, which changes each month as you make charges. Open credit, or closed account, such as charge cards that have no preset limit and which are expected to be paid in full each month, also contribute to your credit score.
New Credit Inquiries
Inquiries on your credit report are one of the factors that goes into calculating your VantageScore. Frequent credit inquiries might be a sign that you’re seeking more credit than you can afford, which could lead lenders to believe you’re in financial distress and a risky borrower. However, you should know that not all inquiries are equal. When you formally apply for new credit (a loan, a credit card or a mortgage), that triggers a hard inquiry on your credit report. Inquiries that aren’t tied to a specific credit application — such as a pre-qualified credit card offer or a check conducted by an employer or landlord with your permission — are considered soft inquiries and don’t impact your score.
Several hard inquiries within a short period of time can ding your credit scores, so it’s important to only seek credit when you need it. You can see a list of hard and soft inquiries on your credit report in the “inquiries shared with others” section.