what impacts your credit score

What Impacts Your Credit Score?

A credit score is the best indicator of your current financial state — and can have a big impact on your financial future.

But what impacts your credit score and how much weight does each factor carry? Here’s everything you need to know about what goes into your all-important credit score.

What Is A Credit Score?

Your credit score is a three-digit number that aims to paint a vibrant picture of your finances, your ability to pay off debt consistently and quickly, and more.

The number is commonly used by lenders and other financial institutions to determine the risk of extending everything from car and home loans to spending limits on credit cards. Credit scores change over time as dictated by changing financial needs and behavior.

A lot goes into pinpointing a credit score, but here's what impacts your credit score the most.

What Impacts Your Credit Score?

Payment History

About 35% of your FICO Score, which lenders use the most by far, is determined by how well you’ve paid off your various loans and accounts over time. This history helps lenders decide whether you are likely to pay your debt back — and pay it regularly and on time.

And yes, missing one payment alone can cause your credit score to drop or remain low. If you’re late with a bill for 30 days or longer, your score can also be impacted.

Credit Utilization

Accounting for around 20% to 30% of what impacts your credit score is the overall amount of your credit limit that is used. Hitting your credit limit time and time again usually damages your score.

Most financial experts agree that a good target is using 30% of your credit limit at the most at any given time. A general rule of thumb: the lower your credit utilization, the higher your credit score.

Credit Use History

What impacts your credit score isn’t just how you’ve used your credit or paid back loans, but how long you’ve been managing credit. The length of your credit history typically accounts for around 15% of your credit score.

In general, the longer you’ve been handling credit responsibly, the higher your score will be. Lenders will look at the ages of your oldest and newest credit accounts and how old your accounts are on average.

man reviewing bad credit score on computer to get payday loan help

Credit Mix

The types of credit you’ve used over time are also part of what impacts your credit score. Diversity is key here, as your handling of multiple types of accounts indicates that you have refined credit experience and tend to use it responsibly.

Lenders will look at not just your revolving credit, such as personal credit lines, credit cards, and home equity lines, but also mortgages, installment loans, student loans, and more. Usually, about 10% of your credit score is determined by your mix of credit types.

New Credit

Also accounting for about 10% of your credit score is the number of recently opened credit accounts, as well as the number of inquiries that lenders initiate when you apply for new lines of credit.

Your credit score is often hurt when you’ve recently used too many new lines of credit or when lenders have made multiple hard inquiries in a short period of time. Taking on more debt quickly can be perceived as a risk to most lenders.

What Doesn’t Impact Your Credit Score

You don’t have to worry about checking your own score if you get it through a credit score service that does it for free or your bank provides it. Even checking your score multiple won’t impact it.

Your overall bank balances and income isn’t a factor either (good or bad). While most credit scores include employer information, it also only lists your checking, savings, and investment accounts.

Consider Payday Loans

It's also important to remember that your credit score does not automatically disqualify you from receiving a payday loan from Alabama Title Loans, Inc. We encourage those with a range of credit scores to pursue a payday loan with us.

Payday loans are tailor-made for those facing sudden financial emergencies and needing some help to tide them over financially between paychecks. These short-term loans are for small amounts of cash and are usually paid off when you get your next paycheck.

At Alabama Title Loans, Inc., the process is quick and easy. Get started by filling out the payday loan form on our homepage. Soon after you submit your inquiry, one of our representatives will give you a call to discuss a payday loan and determine how much of a loan you qualify for.

In as little as 30 minutes, you may be eligible for a payday loan of up to $500 with us.

Get Started Today

Knowing what impacts your credit score can help you achieve long-lasting financial security, but when a financial emergency threatens your financial stability, a payday loan may help. Just start online, give us a call, or visit us today to learn more.

Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.

Louis Tully

Louis Tully is a full-time finance writer offering financial expertise to everyday consumers. He understands the core values of finance and used his writing talents to share his own experiences with money to his readers. His articles teach how financial failures can easily become successes by making new habits and creating realistic goals.