What Makes Your Credit Score Go Up And Down | Finance Update USA


Welcome to the world of credit scores, where every financial decision you make impacts your score positively or negatively! A good credit score is crucial to your financial wellbeing, and it can make the difference between getting approved for loans and credit cards or being rejected outright.

Credit scores are calculated using complex algorithms that factor in several financial behaviors, including your payment history, credit utilization ratio, length of credit history, credit mix, and new credit. Each factor has a different weight in determining your score, and understanding how they affect your credit score can help you make better financial decisions.

Let’s start with the importance of a good credit score. A good credit score can help you get approved for loans and credit cards with better interest rates, saving you thousands of dollars in interest charges over time. It can also impact your ability to rent an apartment, get a job, or even start a business. In short, a good credit score can open doors to opportunities that would otherwise be out of reach.

Now, let’s discuss how credit scores are calculated. Payment history makes up 35% of your credit score, so paying your bills on time and in full is crucial to maintaining a good score. Missed and late payments can stay on your credit report for up to seven years, so it’s essential to avoid them whenever possible.

Credit utilization ratio is another critical factor that makes up 30% of your credit score. It represents the percentage of your available credit that you’re using. Ideally, you should aim to keep your credit utilization ratio below 30%, which means using no more than 30% of your available credit limit. To maintain a low credit utilization ratio, you can pay off your balances in full each month or ask for a credit limit increase (but don’t use it!).

In conclusion, a good credit score is vital to your financial health, and it’s never too late to start working on improving it. By understanding the factors that affect your credit score, you can make smarter financial decisions and build a brighter future for yourself.

Also Watch This Video: How To Improve Your Credit Score Without Debt

Payment history

Paying bills on time is crucial to maintaining a good credit score. Late payments have a negative impact on your score, and missed payments can be even worse. Not only can they drop your score significantly, but they also stay on your credit report for up to seven years!

Yes, you read that right, seven long years of missed payments haunting you and your credit score. Your score may recover as time goes by, but the missed payments will continue to show up on your credit report, reminding potential lenders of your past financial mistakes.

So, it’s important to always make payments on time, and if you can’t make the payment in full, try to at least make the minimum payment. Set reminders or automate payments to avoid missing payments.

Remember, your payment history makes up a significant portion of your credit score, so it pays to be prompt with your payments!

Credit Utilization

Credit utilization is simply the amount of credit you have available compared to how much credit you are using. This ratio plays a significant role in determining your credit score. Ideally, you want to have a credit utilization ratio of 30% or less. Anything higher than that could adversely affect your credit score.

One way to maintain a low credit utilization ratio is to pay off your outstanding balances. Making timely payments and reducing your credit utilization ratio are two essential factors that credit bureaus consider when calculating your credit score. Another strategy to improve your credit utilization ratio is to request credit limit increases from your credit card companies. However, be cautious about this approach as it could lead to more debt if not handled responsibly.

It’s important to keep in mind that a low credit utilization ratio does not mean that you should stop using your credit cards altogether. In fact, not using your credit at all could result in a lower credit score since credit bureaus have no credit activity to evaluate.

Lastly, always monitor your credit card balances and make payment arrangements before the due date to avoid late payments. Late payments could negatively impact your credit score and remain on your credit report for up to seven years.

In summary, credit utilization is a crucial factor in determining your credit score. Maintaining a low credit utilization ratio, making timely payments, and not accumulating too much debt are some strategies that could help improve your credit score and financial wellbeing.

Length of credit history

Ah, the age-old question of credit history – how much is too much, and how little is too little? While it may seem like credit history is just a number on a page, it can have serious implications on your credit score.

So, how is credit history measured? In short, it’s based on how long you’ve had credit accounts open. A longer credit history generally indicates a more stable credit profile, and therefore more creditworthiness. But how long is a good credit history? Well, there’s no one answer, as the exact length that’s considered “good” can vary between lenders and credit bureaus.

Now, if you’re just starting out with credit, you may be wondering how to build credit history. The key is to start small and make sure you make your payments on time. You could start with a secured credit card, which requires a deposit. Just make sure the issuer reports to the credit bureaus, so your payments will count towards building your credit history.

But what if you’ve already got credit accounts, and you’re worried that your credit history isn’t up to snuff? Unfortunately, there’s not much you can do to speed up time. However, you can keep your credit accounts open and in good standing, to ensure that your credit history continues to grow.

Remember, credit history is just one factor among many that can affect your credit score. Keep all the factors in mind and remember the best way to maintain a good credit score is to handle all your credit accounts responsibly.

Understanding Credit Scores: Factors That Affect Your Credit Score | financeupdateusa.com

Credit mix

So, you’ve mastered the art of making timely payments and keeping your credit utilization ratio low, but did you know that there’s still one more factor that affects your credit score? Yes, you guessed it right – it’s the credit mix!

Credit mix refers to the different types of credit accounts you have on your credit report – revolving credit, installment loans, and mortgages. Lenders prefer to see a good mix of credit as it demonstrates your ability to handle different types of credit responsibly.

But why does this mix even matter? Well, having a well-rounded credit portfolio shows that you have experience managing different types of credit and are less of a risk to lenders. This could help you snag a better interest rate or score approval for a loan or credit card.

If your credit mix is not as diverse as you’d like it to be, don’t worry! There are a few ways to improve it. Consider applying for a small personal loan or a credit-builder loan to add an installment account to your credit history. Additionally, you could look into secured credit cards or retail store credit cards to add a revolving credit account to your portfolio.

Remember, while having a good credit mix is important, it’s not a deciding factor in your credit score. However, actively working on improving it could go a long way in boosting your overall credit wellness.

New credit

New credit can have a significant impact on your credit score. Every time you apply for credit, it shows up on your credit report as a hard inquiry, which can lower your score. Too many hard inquiries can signal to potential lenders that you are a riskier borrower.

In contrast, soft inquiries, such as checking your own credit score or when a lender pre-approves you for a credit offer, do not affect your score.

It’s important to be mindful of applying for new credit and only do so when necessary. However, if you do need to apply for credit, try to do so within a short period as multiple inquiries for the same type of credit within a certain timeframe are often counted as one inquiry.

Remember, your credit score is not fixed and can change over time based on your credit behavior.


So there you have it folks, those are the key factors affecting your credit score. Keep in mind that your payment history, credit utilization, length of credit history, credit mix, and new credit all play a role in determining your score. It’s important to stay on top of these factors and take steps to improve them if necessary. Remember, a good credit score can open many doors for you. So be responsible with your credit and watch your score soar!

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