What Types of Financial Activity Impacts My Credit Score? | Cleveland Bradley County Teachers Federal Credit Union

Your credit score is a very important thing in the financial world. The score, which ranges from 300 to 850, is designed to show lenders and financial institutions your “creditworthiness”—essentially, how qualified you are to make use of borrowed funds.

Having a good credit score can help you get lower interest rates and friendlier repayment terms when you have to pursue financing, so ensuring it is a good one is wise. If you are hoping to improve your credit score, it is important that you understand what impacts it so you can make smarter choices about your daily financial actions.

The Factors That Impact a Credit Score

There are several things that impact a credit score, but the two biggest factors are the timing of your payments and your credit utilization. Check out details about those as well as the other factors below.

The timing of your payments. Making your financial payments on time is the single biggest factor that influences your credit score. This means that taking care of utilities, credit card bills and loan payments on time is the best thing you can do to give your score a boost.

Your credit utilization. Your credit utilization refers to how much of your lines of credit you use, which is essentially how close to your spending limits you get. It is recommended that you use no more than 30% of your available credit (so if your credit limit is $10,000, you would aim to spend no more than $3,000 at a time).

How long your history goes back. If you have ever heard advice to not close out old credit cards, this is why. The length of your credit history is something that lending institutions factor into your credit score, so it’s best to trash the old cards but keep accounts active.

The mix of credit types. Lenders like to see a mix of credit accounts (for example, a credit card and a car payment) to see that borrowers can manage their money well.

Total debt balances. Lenders also want to see that you are actively paying off debt, so keeping your total balances on the decline is advised when possible.

If you are hoping to get your finances in order, we can help! We offer personal loans and other types of bank accounts to help you organize your money. Contact us today for more information.