1) Your history of timely debt repayment is shown in your payment history. Your payments on credit cards, retail accounts, installment loans (including auto or student loans), finance business accounts, and mortgages are all included in this component. Also taken into account are open documents and reports describing things like bankruptcies, foreclosures, lawsuits, liens, judgements, and wage garnishments. Your score is impacted by a history of timely payments of at least the minimum amount required. Missed or late payments lower your rating.

2) Amounts Owed or Credit Utilization displays your level of debt and helps assess your ability to pay it off. Your credit score will suffer if you have large outstanding amounts or are close to reaching the “maximum” limit on your credit cards. A decent rule of thumb is to not use more than 30% of a credit card’s available credit.

3) Duration of Credit How long you have had and used credit is referred to as history. Because lenders have a higher chance of seeing your payback record, the longer you have demonstrated appropriate credit management, the better your score will be. If you have consistently made payments on time, you will seem very excellent in this regard.

4) The “mix” of credit you have access to, such as credit cards, retail accounts, installment loans, finance business accounts, and mortgage loans, is referred to as “kind of credit.” Not every sort of account is required. Instead, this component looks at the many sorts of credit you have and how responsibly you utilize it. For instance, using a credit card to buy a yacht can lower your rating.

5) The presence of new credit (inquiries) indicates that you have debt or are soon to acquire more. Opening a lot of credit accounts quickly might make you more vulnerable to debt, especially for those without a long credit history. Every application you make for a new line of credit counts as an inquiry or “hard” hit.