5 Biggest Factors Affecting Your Credit and How to Take Advantage of Them

When it comes to having stellar credit, we all want it. After all, the higher our credit score, the lower the interest rate we get on our mortgages and auto loans, saving us boatloads of money in the process. But many people are left wondering what are the biggest factors affecting your credit?

In other words, what can you do to boost your credit score with the least amount of work possible? Let’s face it, we are all busy people and the last thing we need is for a drawn out list of to-do’s staring us in the face.

The good news is that the biggest factors affecting your credit are simple things you can do. When you follow these steps, you will see your credit score rise on a regular basis. And that will lead to better loan terms and maybe even lower insurance premiums too!

5 Biggest Factors Affecting Your Credit

#1. Pay Your Bills On Time

If you look at what has the biggest impact on your credit score, hands down it is paying your bills on time. Whatever you do, you have to make sure your payments are made by the due date.

How can you ensure this is the case? Thanks to technology you can have it done for you. You can have your credit card company or your utility company withdraw the money from your linked bank account on the bills due date.

Or you could set up automatic bill payment with your bank. Here you give your bank the details and they will make the payment for you.

Even if money is tight, you can still use this plan, especially for credit cards. Just don’t set up the automatic payment to cover the entire balance due. Just pay the minimum and then when you see how much more you can pay, manually send in payment for that amount.

The bottom line is there is no excuse for not making payments on time.

#2. Keep Balances Low

Another of the major factors affecting your credit is your outstanding balances. More specifically, your debt to credit utilization. This is a fancy way of looking at how much of your available credit is tied up.

The higher the number, the lower your score. For example, let’s say you can charge $5,000 on your credit card and you are carrying $2,500 in debt. Your debt to credit ratio is 50% which is too high. This is having a negative impact on your credit score.

Ideally, you want to have this ratio under 20%. Also note that this covers all your credit together, not just one credit card. So if you have 2 credit cards each with $5,000 of available credit and have $2,500 in debt, then you are looking better.

In this case, your ratio is only 25% ($2,500 balance on $10,000 available credit). Also note that mortgages are treated a little different.

The credit agencies know that it will be a long time until you get your ratio here under 20% so don’t be too concerned with this debt. Be more aware of your ratio when it comes to your credit cards and other loans.

#3. Mix Up Credit Sources

Speaking of other loans, another of the major factors affecting your credit is the types of accounts you have. The more diverse your credit profile, the better. This means if you have some credit cards, an auto loan, student loans, and a mortgage, credit issuers have a lot to work with and as a result, you can have a higher score.

Of course there are two issues at play here. First, you have to be smart about your credit. If you are drowning in debt, then you aren’t going to have a high credit score. Second, you shouldn’t just open up various credit accounts to improve your score.

Simply live your life and when you are buying a new car, then you will be taking out an auto loan. And when you decide you are ready to own a home, then take out a mortgage.

Finally, don’t think you need to have all of these types of credit either. The point is to have a variety of credit products on your profile and not just credit cards.

#4. Be Patient

Lastly, when improving your credit, you have to be patient. If your credit score is 500 today it isn’t going to jump to 800 by the weekend. Raising your score it going to take time.

What you need to focus on is following these tips each and every month. Luckily for you, as long as you are paying your bills on time and not going crazy with living beyond your means, you should be lowering your credit ratio in the process.

All that is left for you to do is live your life and take on new credit accounts when it makes sense for you. If you do this, in time you will see your credit score rise.

Final Thoughts

There are the biggest factors affecting your credit and what you can do to raise your score. Remember, raising your score overnight is not possible. But if you can follow these tips, you can improve your score little by little every single month.

Over the course of a year, it wouldn’t be unheard of for you to see a dramatic improvement in your score.

Whatever you do, don’t fall for the late night ads telling you that you can double your credit score overnight. These are scams. Your best option to improve your score is to follow these factors affecting your credit.

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