What Affects My Credit Score and Why Is It Not Raising?
Your credit score matters a lot, especially if you want to apply for a loan. However, improving your score can be a challenging task for you, as you need to take into account several aspects. But once you understand what things can affect your score, you can simply avoid them from happening. This, in return, helps you raise your credit score.
Let’s discuss the factors that improve your credit score.
Payment History
A credit report shows your payment history. It also reveals whether you are continuously paying all the obligations on time, such as bills. 35% of your credit score depends on your payment history. Models like FICO and VantageScore use it to calculate the score.
This is why you need to pay your bills on time and before the 30 days deadline. The later you pay, the more it can hurt your credit scores. You can set auto-reminders to avoid missing due dates or use autopay options with the lender.
Amount of Debt
Debts account for around 30% of your score. The money you owe, also known as the credit utilization ratio, is calculated by estimating how much money you have used from the amount of your debt.
For instance, you have a credit card containing a $200 balance. It has a credit limit of $1,000, and your credit utilization percentage is 20%. In that case, you need to ensure your credit utilization rate is not more than 30%.
Credit History Length
It accounts for more than 15% of your FICO credit score. Credit history length also includes:
- Your account’s average age
- Age of the oldest credit accounts
- Age of your newest account
Usually, longer credit history leads to higher scores.
Credit Mix
Most people with great credit scores have a diverse portfolio of accounts. It can include credit cards, auto loans, mortgage loans, student loans, and other credit items. The models like FESCO consider your types of accounts and how well you are managing multiples of them. Credit mix accounts play a 10% role in your score. However, if you do not see your account rising, this means you are not managing your multiple credit products accurately.
New Credit
When you submit the new credit application, your lender or bank takes out the details from your credit file. This leads to the hard credit check. You may think that one hard credit check is not a big thing, but it can decrease your FICO credit score. Not to mention, your new credit will decrease your account by around 5 points on your FICO score. This is huge for people who are standing between an excellent and bad credit score.
It can also lead to problems for you if you are applying for the new credits too often. This is because hard credit checks will go to add up. Furthermore, if you think your score is not decreasing even after it, you need to understand that it is the reason why your score is on the same line instead of increasing.
Bottom Line
Hence, if you want to improve your credit scores, try to pay your bills on time, prevent applying for new credit, and keep your credit records clean.