The three numbers that make up your credit score can wield a lot of damage against whether or not you’re able to do certain things, like purchasing a house, opening a new credit card, getting approved for an auto loan, and so much more. And the FICO score is relatively new in the grand scheme of credit agencies and the entire financial system that we adhere to.
So if you’re wondering how it all breaks down and what each facet of your credit score actually means, here is how it breaks down. There are a few factors that break down your credit score, which you can see below:
- Payment History: 35% – You’ll want to make sure that you always pay off any debts, like credit card debt or loan debt, on time and with at least the minimum payment. If you pay too little for your minimum payment or you miss your payment due date, then you’ll get a dark mark on your score, especially if it becomes a habit and happens often. If you do have a pretty good credit history then you’ll likely be ok if you miss a payment once in a while by 30 days or so. But when you venture into 60 and 90 day late payments, you might find that your score starts decreasing.
- Amounts Owed: 30% – If you have too much debt spread across various loans and credit cards, that will negatively affect your score as well. You’ll want to keep your credit card debt as low as possible across all your cards, even if you’re transferring over a balance, because you’ll see a dip in your score if you don’t.
- Length of Credit History: 15% – When you have an older credit card history, you’ll be in a better place on your report and will likely have a higher score. That’s why you never want to close old, unused accounts and why you want to show that you’ve been able to persist for so long.
- New Credit: 10% – This refers to how many credit checks you do per year, which you’ll want to keep as low as possible. You’re able to do soft inquiries into your credit history, which means you can check through CreditWise and sites like Credit Karma. However, multiple hard inquiries into your credit history, which occur when you’re applying for a new apartment or loans, will affect your score negatively.
- Credit Mix: 10% – You also want to make sure your credit history is a mix across various facets. This means you don’t want to just have a bunch of credit cards open because it won’t benefit you in the long run. You want to make sure you have things like credit cards, loans, and mortgages.
Luckily, anything that doesn’t show up on your credit score won’t be able to negatively impact your credit score. You’ll want to make sure you check your credit report regularly to see where you’re at and what sorts of things are affecting you over time. You’ll also want to look through your credit report history and see how things have changed for you over time: what sorts of things have improved your score in the past, for instance? And what things have negatively impacted your credit score in the past so that you can avoid doing those things again if possible?