What Affects Credit Score the Most?

Last Revised on August 15, 2011

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You might have seen a lot of ads of tv about free credit score offers. One thing we can learn from it is that people are looking for their credit scores; so there is a demand and thus these companies offering such services. Credit score has been such an important part of any buying, financing or borrowing process that many are asking what factors contribute the most. It determines how much interest rates you will be charged for loans. Here are the details and overview.

Top things that affects your credit score

1. Payment history. This affects your credit score the most, as it looks at your past history of making payments on time or late. The sooner you pay you bills, the better. If any of your account balances is behind their due date or has gone to debt collection agencies, it can decrease your credit score and leaves a negative impact. Your ability to repay the loans and therefore how you handle your money is what they are trying to figure out.

2. Amounts you owe. Remember borrowing isn’t always bad. Especially to build a credit, you need to have an account that shows you have been paying back lenders. If don’t owe any financial entity, then there is no way to tell if you are responsible and stable enough to pay on a timely manner. But if you owe a lot of money, that’s not a good thing either since it would be make your budget very tight. Usually it’s a good idea to build credit through utilizing various sources such as home mortgage, car loans, utility bills, rent, etc.

3. Length of credit history. There is no escape to create a good credit score over night, it has to be build over a period of time. This one show the lenders how long you have been using credit; it could just be a year or many years since you started your job. What does the oldest as well as the most recent account say, and how does averaging all of them together makes your credit look like. A long history is usually preferred; but if you have short good or excellent history that should work out too.

4. Types of credit in use. To build a great credit score, you can go to extreme where you try try intelligently open accounts in different categories such as loans, banks, mortgage, credit cards, store cards, etc. If you have combination of credits from these different accounts, your score will go up. But it is usually not recommended for common people to open many accounts just to raise their score, since this factor doesn’t affect as much as others and the more money accounts, the more risks you are at hurting your credit score.

5. New credits. The companies that calculates your FICO credit score such as experian, equifax and transunion looks at how many new accounts you have opened recently and how you are doing with them. If you have opened many new ones but are still behind some monthly payment dues, your credit score will be affected. When you acquire a lot of new credits it become suspicious and look risky to the lenders.

6. Paying off big bills but forgetting small one. Some people will pay major expenses such as home mortgage and car loans diligently on time but will fall behind payments for small credit card invoices. This can hurt your credit score. You should call the creditor to make arrangements before balances go out of control.

The credit bureaus have access to lot of information relating to your financial stability such as any bankruptcy filing, payment history past and present, credit inquiries, credit utilization and current credit accounts.
They don’t have access to your bank accounts, however; so no worries here.

Some people may still be confused. So list of the things that doesn’t affect your credit score are marital status whether single, married or divorced, age, salary, occupation, receipt of public assistance such as food stamps and welfare benefits, employment history, rental agreements, loan contracts, and any participation in credit or money management counseling program.

As always, please feel free to leave suggestions, ask any questions for help or simply discuss the topic. We highly appreciate your involvement and input everyday. If find it helpful, please share it with your friends by using one of the buttons below.

9 Responses to “What Affects Credit Score the Most?”

  1. Does pulling your credit report often times hurt your score? Says:
    November 17th, 2010 at 11:21 pm

    Please tell me if I am wrong, but I am hearing that if your credit report is pulled up very often your credit score will go down? I didn’t believe that but now it kinda do make sense after I thought about it for a while. Here is the detail scoop on that: your credit score rating report gets a lot of hits when you are applying for multiple types of loans in a short period of time, this sends a warning sign to the reporting agency and negatively affects your credit score.
    So I think it is better to shop around for different loan spread out over a long time. Let me know if I am right. Thanks.

  2. rachat credit Says:
    November 24th, 2010 at 9:47 pm

    I like browsing your blog because you can constantly bring us fresh and cool things, I feel that I must at least say a thank you for your hard work. – Henry

  3. Jotsana Says:
    November 28th, 2010 at 10:12 am

    How does a canceled credit card affect your credit score? Can you explain that. I have had two credit card companies cancel their cards with me because I had not used their cards in years, I never needed to. How will this affect my credit score? Do they let the major credit bureaus know why it was canceled or simply that my account was closed? I would like to keep my record clean, atleast that was my intention for using cards very sparingly. Now I am scared after credit cards were cancelled.

  4. What about adding family members to a credit card? Says:
    December 9th, 2010 at 10:28 am

    Do you think adding family member to credit card can hurt your credit score? Lets say if I want to help my spouse or kids to build their credit history, so if I add them to my already established credit card will it have any impact on my credit score? Most importantly, if I maintain my credit in good standing, would it help establish any credit for them. It is just that I bring home the most money and pay bills from my account.

  5. Katelyn Farrah Says:
    December 11th, 2010 at 5:16 pm

    Ok I recently graduated from college and wanted to change my credit card account from student to normal account with the same provider. I have been using this same card for over 5 years now and I think I accrued a lot of “good credits” over this time period. Now since I will be switching to regular credit card account but the issuer remains the same, I am afraid my score will have some impact. What affects credit score? Specially in my case, since I won’t have free access to online credit statements either now. I am looking for various options to choose from, but right now am little lost.

  6. Does requesting a credit line increase on credit card have any impact? Says:
    December 24th, 2010 at 7:24 pm

    I am all new to this credit card and credit score world. So please excuse my ignorant questions, but if I ask to increase credit limit on my credit card does it have any negative effect on my credit score? I recently got another card and now was trying to get a car loan, I don’t think they have to run credit report. I have paid all my loans in the past without falling behind the date, all bills are paid in full. No debts whatsoever.

  7. How much does getting a new credit card hurt your score? Says:
    February 9th, 2011 at 9:53 pm

    I got excellent credit score with two great credit cards which I have been using for over 5 years and have been paying all my bills such as car payments and mortgage on time. Since the interest rates are really low these days I was wondering maybe I should refinance my mortgage.

    I just got an offer from Delta airlines for their credit card; it has no annual fee the first year and would give me free 40,000 air miles. I would like to accept the miles offer because that’s the most miles I could get quickly anywhere, but I don’t want to take it if getting a new credit card would adversely affect the possibility of refinancing in the next few months by lowering my credit score.

    The largest part of your score is your payment history 35%, followed by not your debt to credit ratio 30%. The best thing is to wait until after your refinance is completed and then sign up for any Air Lines credit card.

  8. Wells Fargo loans Says:
    August 15th, 2011 at 7:59 am

    Yes, all the above factors play most of the role but don’t forget how important the type of debt you carry matters a lot too. Many people don’t know, other than a banker or loan experts, that there are two types of debts that can affect your credit score either positively or negatively. Installment debt is a better one to raise score, whereas the revolving debt may lower it. Although this will also depend.

  9. can you overpay debts to raise my score? Says:
    March 13th, 2012 at 12:38 pm

    Does your credit score go up or down if you over pay credit cards? Can anybody please confirm because i need to raise it due to my bad history in my records. I can pay extra for some of my loans too.

    The short answer is no. A lot of financial experts say that if you can afford to make extra payments then consider paying more than your minimum balance but don’t pay it off in full. It doesn’t help to improve the score because the credit rating calculation looks for account activity and if you paid off everything then there is no activity to look at your profile.

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