Your Credit Score is a number that helps a lender decide whether to lend you money. The higher your score, the easier it will be for you to get approved and get better rates. There are 5 components to this number:
Payment History: even if you only pay the minimum, it’s important to pay every loan on time. You can always set up automatic payments to give you peace of mind.
Credit Utilization: for your loans that have a credit limit, such as a credit card, it is best that you do not exceed more than 30% of your maximum credit line. For example, if you have a $1,000 credit limit on a card, keep your balance lower than $300.
Length of Credit History: the longer you’ve had credit accounts, the higher your credit score will be. This is why it’s best to start building your credit early, either with a student or secure credit card.
Recent Inquiries for Credit: when you apply for any loan, the lender will look at your credit history, which temporarily lowers your credit score by a few points. The more inquiries, the lower your score, so don’t apply for many different loans at the same time.
Types of Credit Used: Lenders want to see how you utilize different types of loans, like credit cards, personal loans, and lines of credit. But don’t just apply for multiple types of credit in a short period just to boost your score; as noted above, the inquiries will hurt your score.
