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The 5 factors used to generate credit scores

Do you know your credit score?

March 26, 2019

Credit scores are used for so many transactions these days, from buying a car to renting an apartment. Five factors go into generating your credit score:

1. Payment history: Do you pay your bills on time

2. Credit utilization: What percentage of your credit limit are you using?

3. Length of credit history: How long have you had credit cards or loans

4. New Credit: Have you added new credit accounts, such as a new credit card or loan recently?

5. Credit Mix: Do you use various types of credit, such as credit cards, a car loan, mortgage, etc.

Payment history is the most important factor, it accounts for about 35 percent of your credit scores with most credit models.

So pay your bills on time, or your credit score will suffer. Financial experts say one late credit card payment of more than 30 days, could knock 100 points off your score. That's a big deal. And it could take years to get back to where you were.

Also: Try to keep you credit card balances to under 30 percent of your credit limit. Anything more than that indicates an elevated credit risk, which will lower your credit score.

More Info: 5 Factors that Determine a FICO Score

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