Whether you’re looking to purchase a home, car, or any other major purchase, having a good credit score is essential. Your credit score is a three-digit number calculated based on your credit history that lenders use to determine your creditworthiness. Understanding and improving your credit score is essential if you’re looking to make any major purchases in the future.
The first step to understanding and improving your credit score is to know what it is and how it’s calculated. Your credit score is based on five factors: payment history, amount of credit used, length of credit history, types of credit used, and new credit inquiries. Payment history accounts for 35% of your score, amount of credit used accounts for 30%, length of credit history accounts for 15%, types of credit used accounts for 10%, and new credit inquiries account for 10%.
When it comes to improving your credit score, there are a few tips you can use. The first and most important tip is to always pay your bills on time. Payment history is the most important factor in determining your credit score, so it’s essential to make sure you’re making all your payments on time. Additionally, it’s important to keep your credit utilization low. Your credit utilization is the amount of credit you’re using compared to your total available credit. Aim to keep your utilization below 30%. Lastly, it’s important to only open new credit accounts when necessary. Too many new credit inquiries can lower your credit score, so make sure to only open new accounts when you need them.
Improving your credit score takes time, but with a few simple steps you can start to improve your score and reach your financial goals.
