In today’s world, it is tough to survive without credit. Essential purchases such as houses and cars are quite difficult to obtain without some financial assistance. A poor credit history can hurt one’s chances of getting these items. Many are under the impression that paying your bills on time is all that you need to worry about when it comes to your credit score. This is vitally important however; there are several other factors in play. Two key factors that help determine that magic number are the length of your credit history and new accounts that you apply for.
Your credit history length is important when it comes to determining your score. It accounts for about 15% of the total number. A longer credit history is looked upon more favorably than a shorter one. Someone with a credit history of 6 months isn’t going to look as impressive as someone with a history of 6 years. It takes time to establish a payment history. Those with longer credit histories typically have higher incomes as well.
When determining credit history length, they mainly look at individual accounts. An account that has been opened and regularly used for a few years is going to influence your score more than a newly opened account that has only been used a few times. They also consider how long it has been since accounts were last used. An account that is opened but hasn’t been used in years will have little bearing compared to one that is opened and regularly used.
New accounts also can influence your score. This account for about 10 percent of the overall number. They consider how many new accounts that you have and how often they are used. They also look into any requests for new credit. Lots of credit requests made close to each other can damage your score. even if they are all approved. It is best to space these out and control the number of accounts you have.
Your credit score is very important to your financial future. It can help determine if you will own your own home or have to accept a life of renting. It can determine if you get that new car loan or have to drive that old used banger for another year. Payment history is important but it is just one of many factors is gaining a good credit score.