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The 5 Biggest Factors in Your Credit Score

Credit score is one of the biggest factors in securing a loan of any kind at a competitive interest rate. Anyone looking to raise credit score fast should first be aware of what goes into a credit score. At this time there are five major components, with two being weighted far more than the others:

1. Your Payment History – 35%
Paying on time consistently is often the deciding factor between an exceptional credit score or just an average one. Of all the tips to improve credit score, managing your payment history can have the most impact over time. While an occasional slip is understandable, months of late payments can have a devastating effect on credit score. This goes for the missed payments that precede a home foreclosure or short sale. The moral of the story? Pay on time, every time, and you'll be rewarded with a higher credit score. With today's lenders allowing the setup of automatic payments online, having a good payment history is easier than ever.

2. Amount Owed In Relation to Your Available Credit – 30%
This next factor shouldn't be surprising; the amount of money you currently owe dramatically affects your credit score. This number is related to the amount of revolving debt owed relative to your remaining available credit. It's calculated in terms of your overall debt vs. available credit picture as well as for each individual account. One way to reduce your debt impact is to never use more than 50% of available balance from any one lender; using less than 33% of available funds is even better. Owing smaller amounts on several cards helps improve credit score versus maxing out one card.

3. The Length of Your Credit History – 15%

Longstanding positive relationships with creditors also factor into credit score. Having three credit cards for seven years or more with low balances looks great on your credit report. The longer an account is in good standing, the more it will raise your credit score. Strive to pay down credit card debt, then leave the accounts open with occasional activity that's paid off right away.

4. Type of Credit Debt – 10%
Credit type also factors into your score. Installment debts like auto loans are regarded more favorably than revolving accounts such as credit cards. Credit diversity helps your score; for example, successful handling of a home mortgage and car loan along with credit cards will help boost your credit score.

5. New Debt and Credit Inquiries – 10%
Adding new debt to a credit account plus credit inquiries also makes an impact on your score, albeit a smaller one. On the bright side, if you are shopping for a car, inquiries from auto lenders that take place within 14 days of one another will be grouped as just one inquiry; when shopping for a home mortgage, this grouping grace period is 30 days.

Improving credit score fast starts with a basic understanding of what goes into a credit score. Remember these five areas -- especially #1 and #2 -- and you'll be well on your way to raising your credit score.


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