Credit Score Calculations: What Factors Matter Most?

Your credit score is a three-digit number that represents your creditworthiness. Lenders and financial institutions use your credit score to determine your eligibility for loans, credit cards, and other financial products. In this guide, we'll dive deep into credit score calculations and the factors that matter most.

Payment History

Payment history is the most crucial factor in credit score calculations. It accounts for 35% of your total score, making it the most significant factor in determining your creditworthiness. Your payment history includes information on how well you've paid your past debts and bills.

Credit Utilization

Credit utilization is the second most important factor in credit score calculations, accounting for 30% of your total score. Credit utilization is the percentage of your available credit that you've actually used. It's essential to keep your credit utilization low to maintain a good credit score.

Length of Credit History

The length of your credit history makes up 15% of your total score. The longer your credit history, the better your credit score will be. Lenders like to see a long credit history to evaluate your creditworthiness accurately.

Credit Mix

Credit mix makes up 10% of your credit score. A good credit mix includes a variety of credit types such as credit cards, personal loans, mortgages, and auto loans. A diverse credit mix shows lenders that you can handle multiple types of credit effectively.

New Credit

New credit makes up the final 10% of your score. Opening too many new credit accounts at once can lower your credit score because it suggests that you are taking on too much debt. Be cautious when opening new credit accounts.