What Lowers Your Credit Score?

What lowers your credit score?

There are several factors that go into creating your credit score. If you know what goes into your credit score, you will know what lowers your credit score and what raises your credit score. On this hub you will learn more about what information makes up your score and how to fix your low credit score if you have one.

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The biggest factor -35%- of your credit score is your payment history. If you have a bad payment history, miss a couple payments a year, you will not be on the right track to having a high FICO.

You will also have several late fees on your credit cards and higher interest rates. If you cannot pay your bills on time, you will not have a good credit rating.

You can fix this easily - make all your payments on time. Sometimes that is easier said than done.

Next up you have the amounts you owe. This makes up 30% of your score. If you have credit lines of $50,000 and have borrowed $49,000 of that, you will not have a good score. More than likely you will have a very low or bad credit score.

The way to raise your score if you have this problem is - reduce your debts. Find some ways to make more money to pay off what you owe.

Next at 15% if the length of your credit history. The longer you have your accounts open the better. You want your accounts to be aged. And no, 3 to 5 years is not that long. 7 to 10 years of good credit history is much better.

10% of your FICO is any new credit you have. If you are opening new accounts this can lower your score. Hard inquiries on your report will lower your score. Try to minimize opening new accounts if you don't have to.

The last 10% of your score is the types of credit you use. You want to have a good mix of auto loans, home loans, and revolving debts or credit cards.

If you only have one type of debt, you will not have as high a score as possible. This does not mean go out and get a new car loan just to raise your score by up to 10%.

Those are the factors that determine your score.

But it is not just your score that will determine if you get the loan or not. Lenders take into account your income and job history to make a decision to lend you money or not. They want a full picture of how well you manage your finances.

Now that you know what lowers your credit score and improves your score, you can make better decisions about your finances.