These are the main factors that determine your credit score

Credit scores are representations of an individual’s creditworthiness and are used by lenders to assess the risk of lending money to a person. The specific factors and their weightings used to calculate credit scores may vary depending on the credit scoring model, such FICO.

Credit score assessors Experian remark that two-thrirds of Americans have at least a Good FICO score.

The concept of credit scoring began to gain prominence in the 1950s and 1960s. However, it was in the 1980s and 1990s that credit scores started to play a more important role. Now they are ubiquitous in the US; a financial system set up to spend money people don’t have and then punish them for it.

What determines a credit score?

The main factors that generally determine a credit score include:

Payment history is the most significant factor affecting your credit score. Consistently making on-time payments are crucial, including credit card payments, loan installments, and other credit obligations.

Credit utilization refers to the percentage of your available credit that you are currently using. It is calculated by dividing your outstanding credit card balances by your total credit card limits. Keeping your credit utilization low, generally below 30%, will positively influence your credit score.

Another factor is the length of time you’ve had credit accounts. Usually, a longer credit history demonstrates a more extended track record of responsible credit management, boosting your credit score.

Lenders like to see a mix of different types of credit, such as credit cards, installment loans, and retail accounts. A diverse credit portfolio, when managed responsibly, can positively impact your credit score.

Opening multiple new credit accounts in a short period can negatively affect your credit score. Each time you apply for credit, like a credit card or loan, it generates a hard inquiry on your credit report, which can reduce said score if managed poorly.