![]() Lenders like to see variety whether it’s a credit card, student loan, or something else different types of credit and payment histories make you appear more reliable.Īnd there you have it. The final ingredient? The different types of credit you carry. This is not to say you shouldn’t have multiple types of loans. This applies to different types of credit, such as a car loan, a credit card, mortgage, etc. Opening or applying for too many new credit lines in a short period of time can signal to a financial institution that you may be high risk to lend to. Similar to having no credit, new credit also impacts your score. The final two ingredients are salt and pepper they go hand-in-hand and both make up 10% of your score. If you are just starting out, consider applying for a secured credit card to help build your credit. There is a sweet spot, though - too many accounts can also impact your score. You will want to keep in mind how long your accounts have been opened and used. This comes with time, but having a long and consistent credit history will show lenders that you have a history of paying off your debts and are reliable. The next few ingredients of the sauce (your credit score) don’t carry as much weight, but can still make a large impact, like the length of your credit history. This makes up 30% of your overall credit score because if you have used too much of your credit line, it signals to financial institutions that you are at a high risk of defaulting and could become delinquent on payments. The next ingredient is the amount of credit you have used or, in other words, the amount you owe. A strong and consistent payment record makes it more likely for you to get a loan in the future.Įxplore our credit cards with a variety of features including smartwatch payment abilities, EMV chip fraud prevention, and no annual or foreign transaction fees*! When you go to apply for a mortgage or get a car loan, your payment history will show other lenders that you pay back what you owe consistently. By paying off your debt on time, you are building a payment record that is reliable. ![]() According to GreenPath, 35% of your credit score is your payment history, making it the single most important factor. ![]() The key ingredient is your payment history. They use these ingredients to determine your score and then rank said score on a scale from very bad to excellent. The five components of a credit scoreĬredit scoring companies calculate your score based on five different ingredients. But, before we dive in, let me preface this by saying, the sauce really isn’t that spicy at all. ![]() Knowing the secret sauce that makes up your credit score will also help improve your overall financial well-being. It is much less nerve-wracking to apply for a loan when you know what banks, credit unions, and lenders are looking for in your score. ![]()
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