Posted on: Nov. 24, 2017 in Credit

Your past credit history is very important. If you’re not aware how credit scores work, it can be easy to assume one missed payment to your credit card or having lots of debt won’t really hurt you. But once you know how your score is derived, you can use this information to help you raise your score to new heights!


Payment History

This is perhaps the most important aspect of your credit score as it makes up 35% of your score. Lenders want to know that you’ll pay them back, and pay them on time, too. Never miss a payment and make sure to always have yours in by the due date. If you’re running into trouble, it’s best to call the lender and try to work something out rather than ignore the problem.

Amounts Owed

Next up, accounting for 30% of your credit score, is the amount you owe. Too much outstanding debt will lower your score and make you look risky to lenders. Whether it’s on one credit card or spread across multiple accounts and loans, owing too much will hurt you. Aim to have less than 30% of your available credit tied up in debt.

Length of Credit History

Young people often suffer on this one because they simply don’t have the long-standing history adults do. The best thing you can do is open one card and stick with it. Use it regularly to keep it active, but don’t go overboard. This will build up a long history with one particular lender. Over time, your history will grow as long as you maintain one or more active accounts, but keeping one account for many years shows even more longevity. Length of credit history makes up 15% of your score.

New Credit

You may have heard that applying for credit and opening new cards can hurt you, and it’s true. This only makes up 10% of your score and doesn’t have a huge impact, but any new accounts and inquiries can ding your score a bit. If you open too many new accounts at once, you look desperate for cash. Make sure you only open what you need, when you need it.

Type of Credit Used

The type credit accounts you have makes up the last 10% of your score. There are two types of credit: Installment (think car loans and mortgages) and revolving (credit cards). You want to have some of each over your credit history as both show you know how to handle money and budget. If you’re missing one, consider opening that type of account.

If you’re ready for a new car but your credit is keeping you from getting approved, CreditYes can help with our bad credit auto loan program! We can match you with a dealership in your area that will be with you every step of the way. Our service is fast and free. Fill out our secure online application and get behind the wheel of your next car today!