You’ve probably been hearing the words “credit score” since you were kid. Unfortunately, it’s not something we’re taught in school but it’s extremely important; it’s the only grade that matters after college.
Sadly, very educated and intelligent people know nothing about their credit score, let alone what it actually means. The technical definition:
A number assigned to a person that indicates to lenders their capacity to repay a loan.
You have to have good credit if you want a loan, want to rent an apartment and sometimes to get certain jobs. Thanks to LearnVest, below are all the factors that go into your credit score:
Factor: Payment History
Its Impact – 35%
Significance – Missing payments hurts your score more than any other factor.
Factor: Credit Utilization Rate
Its Impact – 30%
Significance – This shows what percentage you are using of your available credit. It’s best to be using less than 30% because it shows you know how to use credit and pay it off.
Factor: Length of History
Its Impact – 15%
Significance – This shows how long your accounts have been open and how long it’s been since there’s been activity in them.
Factor: Amount of New Credit You Have
Its Impact – 10%
Significance – This tallies what percentage of your accounts have been recently opened and how many inquiries were recently made on your credit.
Factor: How Many Types of Credit You Have
Its Impact – 10%
Significance – It is better to have varied types of credit, such as credit cards and student loans.
Check your credit score for free and without penalization here.
Want to learn more about your credit score and budgeting? Read More:
- How to Take Control of Your Financial Habits in 2020
- 5 Apps That’ll Help You (Gulp) Monitor Your Credit Score
- How to Improve Your Home on a Budget
*This article was updated on December 5, 2019.