A credit score is a numerical expression based on a level analysis of a person’s credit files, representing the creditworthiness of an individual. Calculated by credit bureaus, it is influenced by five key factors:
- Payment History (35%): This factor has the most significant impact on your score. It reflects whether you’ve paid past credit accounts on time.
- Amounts Owed (30%): Known as credit utilization, it gauges how much you currently owe in relation to your credit limit.
- Length of Credit History (15%): This takes into account how long your accounts have been operational, including the age of your oldest account, the age of your newest account, and an average age of all your accounts.
- Credit Mix (10%): This reflects the variety of credit products you have, including credit cards, installment loans, finance company accounts, mortgage loans, etc.
- New Credit (10%): This includes the frequency of credit inquiries and the number of new accounts opened; a larger number can signal higher risk.