Today we are going to discuss what affects your credit score. Your credit score can feel like a mystery, but it’s not. It’s just a snapshot of how you handle money and debt. Knowing what affects it can help you make better choices and keep your score healthy.
The biggest factor is payment history. Do you pay your bills on time? Even one late payment can hurt your score. Next is credit utilization, how much of your credit you use. For example, if your credit card limit is $10,000 and you owe $5,000, you’re using 50%. Keeping it below 30% is ideal.
Another piece of the puzzle is the length of your credit history. The longer you’ve had accounts, the better. Then there’s new credit inquiries. Applying for several loans or credit cards in a short time can lower your score.
Finally, there’s credit mix. Lenders like to see a variety, such as credit cards, car loans, or mortgages. It shows you can handle different types of debt.
Here’s a quick example: Sarah pays her bills on time, but she maxes out her credit cards. Her score drops because her credit utilization is too high. By paying down her balances, Sarah can boost her score.
Understanding these factors can help you stay ahead. A good credit score opens doors to better loans, lower interest rates, and more financial freedom.
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