What Affects My Credit Score?
Because each borrower’s credit score is a reflection of his or her unique credit profile, it is not possible to quantify in advance exactly how each item in your credit history impacts your credit score. No one can tell you, for example how much your credit score will be affected if you pay off a delinquent account or cancel a credit card. We do know, however, that there are things you can do to improve your credit profile. Some of these factors are:
- Making Timely Payments. Making your payments on time is the best way to increase your score. Delinquent payments will decrease your score.
- The Number Of Trade Lines. The number of credit cards, lines of credit and other types of credit (“trade lines”) you have available will affect your score. If you have a lot of trade lines, this may decrease your score because of the risk that you might not be able to pay all of your accounts. You may wish to consider canceling credit cards you do not use regularly or choosing 2-4 cards to use and canceling the rest. If you close or cancel an account voluntarily, it will not have a negative effect on your credit score. You may wish to reconsider accepting “pre-approved” offers for credit cards, or if you accept an offer, perhaps you should cancel another credit card. On the other hand, if you have no trade lines, this will likely decrease your credit score. Lenders generally want to see that you have some available credit and that you can handle your credit wisely.
- How You Use Credit. The amount outstanding on each of your credit cards will also affect your score. In general, the lower the amount outstanding, the more likely it is that your score will be higher. Basically, you want to have more credit available than you owe.