How Your Credit Score Is Calculated
The following is what goes into determining your credit score:
- Payment History (35%). Making payments on time is a critical factor in establishing a good score. Missed or late payments and bankruptcies will result in a lower rating, as will collections and consumer proposals.
- Outstanding Debts (30%). As long as you pay your debts, you’re in good shape. However, the more money you’ve borrowed and have yet to pay back, the lower your credit score will be.
- Credit History (15%). A long credit history says more about your financial habits than a short one. This is why it’s a good idea to start building your credit early; with small loans, you’ll be able to pay it back.
- Recent Credit Inquiries (10%). Lenders will often inquire about your credit. Numerous recent requests to check your credit can negatively impact your score, although not as much as missed payments.
- Credit Diversity (10%). Like credit inquiries, this isn’t a massive part of your credit score, but it matters. Having many different types of credit demonstrates an ability to manage your finances well.