We get lots of questions from consumers on Equifax.com, our Facebook page, Twitter and now the Equifax Personal Finance Blog about what factors impact credit scores.
The truth is, you have control over your credit. Only you determine what accounts you open, how much debt you carry, how you make your payments, and how responsible you are with your credit and how that behavior translates to your credit report. Your credit score is comprised using the information from your credit report, so understanding how your credit behavior, especially paying down debt, may impact your credit score over time is important.
How Is My Credit Score Calculated?
Your credit score is a number based on different factors in your credit history, including:
- Payment History. Do you make your payments on time or are you late? If you’re late, how late are those payments? Are you paying in full or only making minimum payments?
- Amounts Owed and Available Credit Balances. Creditors look at how much installment and revolving debt you owe. But they also want to know what percentage of your available credit balance you are using.
- Length of Credit History. How long have your credit accounts been open? Which accounts have been closed and why?
- New Credit Accounts. Opening several new accounts can affect your length of credit history, your available balances and could negatively impact your credit score.
- Types of Credit. Creditors like to see a variety of types of credit, including installment loans (such as auto loans), revolving loans (such as a mortgage or home equity loan), and open credit accounts (such as credit cards).
Paying your bills on time and your available balance are the two biggest factors in calculating your credit score, accounting for over 65 percent of your credit score computation. It’s basic math – handle these two things well and you’re more likely to have a higher credit score, generally speaking.
While the last three factors only account for 35 percent of your credit score calculation, if you keep applying for new lines of credit, it will affect your score.
Learning how to think differently about the components of your credit history and credit score is the first step toward being more in control of your financial life. Read more about what factors impact your credit score at Equifax.com.
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.