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Five Factors That Influence Your Credit Score

Before I explain what influences your credit score, it’s important to understand what exactly a credit score is. Essentially, it is a summary of your credit history broken down into a numbered rating. You get points when you use your credit responsibly and you lose points if you have trouble managing your credit. Your report is initially created when you borrow money or apply for credit for the first time and gets adjusted every 30 – 45 days from that point on.

There are several factors that will influence your credit over time, these include: 1. Payment History – Roughly 35% of your credit rating is based on your payment history. This includes bill payments, credit card payments, mortgage payments etc. Each late payment will stay on your report for seven years, but you can help recover your score by paying back your debt which will help you rebound from a poor credit score relatively quickly.

2. Credit Utilization – Having a large debt doesn’t always mean you’re a high-risk borrower, if you use a low percentage of your available credit and pay it back in full each month, this will positively impact your overall credit rating. Consider this; a $5,000 balance on a $6,000 credit card is worse in terms of utilization than a $10,000 balance on a $25,000 credit card or loan.

3. Length of Credit History – The longer your credit history is the better. Having years of credit helps show your lender that you have experience managing and paying off debt. This means, keeping your longest standing credit card open, even if it has a small credit limit can be doing your credit score wonders.

4. New Credit – Recent research shows that applying for a lot of new credit or financing in a short time frame can negatively impact your credit score. Your average account age will lower and affect your length of credit history, which will have a negative impact on your credit score and increases the risk factors when lenders are considering your application.

5. Types of Credit in Use – Having more than one type of credit account on your file, when payments are made on time and in good standing, can increase your rating. Balancing between installment and revolving credit can also help to increase your credit score. Curious to know what your credit rating is? You can seek a full credit report from Equifax or TransUnion, through their easy to use online portals. Alternatively, if you are in the market for a mortgage, during the application process, I’ll access your credit report and we can discuss your credit score and details at that time. To start your mortgage approval process, connect with me today.


Chad Eliason 📞 250.804.9874 📧 info@chadeliason.ca⠀ 🌐 http://www.chadeliason.ca

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