What is a Credit Score

Your credit score is a measure of your creditworthiness or credit risk. It is used for every financial consideration from auto loans, home loans and credit cards to job applications, acquiring insurance and even renting apartments. Bottom line – the higher your score, the less “risky” you are. After all, they don’t know you, so they have to rely on an objective source to make their credit decisions.

What Determines Your Credit Score

Your credit score is based on the five categories you see in the chart below. 

How Each Category Affects Your Score

Payment History – 35%

This is the most important aspect of your credit score. It rates the timeliness of your credit payments as well as the length of time you’ve been paying on those accounts.

Debt Balances and Ratios – 30%

Approximately one-third of your credit score is based on how much you owe versus how much credit you have. This is primarily driven by revolving credit which is typically the amount charged credit cards compared to the credit limit.

Credit History – 15%

Credit scoring rewards long-term use of credit. Because you cannot simply create a long-term credit history, you must utilize the credit history you have to its greatest benefit.

Credit Mix – 10%

This portion of your credit score factors in the types of credit accounts you keep and how many different types you have. From the lender’s perspective, if you have a “good mix’” of credit types on your credit report, you will tend to be less risky than those who only have experience with one type of credit.

New Credit – 10%

The New Credit category measures the frequency and amount of credit activity you show for the past 6-12 months. Simply put, these are the accounts you’ve signed up or applied for recently and it represents 10% or less of your score. However, this can be the difference between being eligible for a car loan or not.

It may be helpful to fetch your latest credit report from http://www.annualcreditreport.com and see what might be affecting your credit. RentTrack is not a credit counselor and therefore cannot advise you on what might be affecting your credit.

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