About Your Credit Score
Wondering what is a credit score? Get everything you need to know about your score and how it is calculated here.
What Affects Your Score
About 60% of consumers have credit scores of 700 or higher. To fall into the highest credit tier, borrowers must have a credit score of at least 720. Consumers who have a credit score of exactly 720 shouldn't bother with trying to improve their score because creditors group everyone with a score of 720 and higher into the same category. In other words, it doesn't matter if your score is 720 or 800; you will still receive the same rates and terms. To answer the question what is a credit score, we've summarized the variables that impact a credit score below.
- Payment history: 35%. Paying on time and never skipping payments are the best things you can do for your payment history.
- Amount owed: 30%. This refers to how much you owe in relation to the total amount of available credit. People with higher levels of debt with regard to their total credit limit will look maxed out to lenders, who in turn view them as a higher risk.
- Credit history length: 15%. The older your accounts, the higher your score will be. The length of your credit history considers the average age of your accounts as well as the age of your oldest account.
- New credit: 10%. This portion of your score factors in the number of inquiries made about your credit in a certain time frame. Opening multiple accounts in a short time period can reduce your credit score. This portion of your score factors in the number of inquiries made about your credit in a certain time frame.
- Credit mix: 10%. Credit mix refers to the kinds of credit you are currently using, such as credit cards, installment loans, etc. A more diverse credit mix will help your score.
Raising Your Score
Most consumers who want to find out what is a credit score are also interested in learning how to raise their scores. As explained above, payment history has the biggest impact on your score, so paying on time consistently will help you improve your score the most. On the other hand, the fastest way to boost your credit score is to pay down your outstanding balances. Try to spread your debt out to where you're utilizing less than 50% of your credit limit on all of your cards.
