There are a number of reasons why people today want to increase their credit scores. A higher credit score is usually a sign of good credit prowess and gives you access to borrowed money and reasonable interest rates. 

Increasing your credits core also allows you to achieve higher limits on your current credit cards and also increases the chances of you getting loans on important purchases, including a home or a car. While there are instant loans for people with bad credit, it is better to avoid the hassle altogether and improve your credit score. 

Knowing the importance that their credit score carries, several people try their best to improve it and be approved for loans at a decent interest rate. However, to improve your credit score, you first need to be fully aware of the metrics that go behind it. 

In this article, we look at some of the factors that make up your credit score. This list has been finalized after proper fact checking and can be considered a guide to improving your credit score and knowing more about it. 

When we discuss the factors that contribute to your credit score, it is necessary to note that certain actions can have bigger impacts than others. For this very reason, we have created this list in a proper manner, with factors carrying the most important ranked at the top and those carrying the least important ranked at the bottom. We have also tried to give a percentage to each metric to clarify your understanding of how much that metric matters. 

Payment History 

Your previous payment history is the very first factor contributing to your credit score. You should know full well that not paying your loans and bills on time, especially those for credit lines, including your current credit card, can damage your credit history and reduce your credit score as a result. 

Your payment history is the most important factor determining your credit score and accounts for over 35% of the total rating. 

To clarify your understanding of payment history, the list below determines factors that make up this percentage; 

• Home mortgage payments 
• Car loans 
• Cell phone bills 
• Student loans 
• Medical bills 
• Bank lines of credit 
• Store credit accounts 

One late payment on any of the accounts above will not severely dent your credit history, but several late payments can decrease the score. 

Credit Utilization Ratio 

The credit utilization ratio is the second most important factor considered while calculating your credit score. The credit utilization ratio may sound complicated, but it is a fixed percentage that determines just how much of your total available credit is currently being used. For instance, if you have a credit card with a limit of $10,000 and have availed $4000 of this in credit, your credit utilization ratio will be marked at 40% for the card. 

Your credit score includes your total utilization rate and determines your rating based on that. A lower credit utilization ratio does a good job of improving your credit score. Hence, a good way to improve your credit score is to reduce your credit utilization by either reducing your dependency on credit or by taking out new sources of credit. 

Credit Age and History 

Credit age and history are both considered within your credit score and make up 15% of the total rating. New credit card holders who have just started using credit will not have a good credit score. If your credit age and history is young, you have nothing else to do other than to keep using credit and hope for improvements. 

Credit Mix 

Credit Mix makes up 10% of your total credit score and is said to be determined through the mix of credit openings you have from your account. A greater variety of credit, along with different sources of credit cards and loans, ensures that you have a good credit mix and a good credit score as a result. 

Credit Inquiries 

Lenders send an inquiry to the credit agency or bureau whenever you apply for a credit card or a credit loan. Credit inquiries make up 10% of your credit score and are distributed into soft and hard inquiries. A hard inquiry is made by banks and reporting agencies, while a soft inquiry is made by landlords and companies before they do business with you. 

These are just some of the factors that make up your credit history and your credit score. We hope you can work on improving the score now that you know of the factors behind it.