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Insurance companies, your landlords and even your employers will look at your credit score before lending you with any new line of credit or even before hiring for your new job. ‘Get your credit straight’ is the advice that you may find most financial experts give when you ask them about good credit card rates.

If you have amassed a huge amount on your multiple credit cards and you have sought help of credit card consolidation or credit card debt settlement, it is most likely that this will have a slight effect on your credit score. You can easily monitor your credit score, if you come to know about the factors that comprise your score. Read on to get an idea of the factors that make up your score.

Important factors that make up your credit score

There are many scoring models that are used by different lenders, but the most famous one used is the FICO score or the Fair Isaac Corp. The FICO score are offered at a range of 300-850 and the higher your score is, the better it is for you to qualify for new lines of credit. Here are the factors that can constitute your score.

  • Your payment history: 35% of your credit score comprises of your payment history. Paying your credit card bills on time and not accruing late payments and penalty fees is the best thing that you can do to maintain a good FICO score. Remember the due dates and make sure that all your payments reach the lender within the stipulated date and time. You’ll be allowed 7-10 working days for your payments to arrive. Dispatch them at the right time if you’re making online payments.
  • The amount owed on your cards: 30% of the credit score is made up of the amounts that you owe on your cards. This factor is determined by calculating how close you are to the credit limit of your credit card. Always try to stay within the credit limit so that your score is maintained at a good level and you can remain creditworthy to your lenders.
  • The length of your credit history: The length of your credit history takes 15% of your credit score. The biggest mistake that is committed by most debtors is that they tend to close unused accounts and this unnecessarily shortens their credit history, thereby lowering the score. You can benefit by using an unused card as it helps with your utilization ratio.
  • New credit: New credit refers to the new line of credit that you have applied for recently. How many opened credit card accounts you have, how old each account is, how many inquiries have been made into your credit report and how old each inquiry is, are the factors that constitute the new credit that takes 10% of your score.
  • Type of credit you’re using: The last category looks at the various type of credit you’re using. It is most likely that you will have a better credit score with a mixture of mortgage loans, car loans, revolving credit and installment credit. With that said, you need not take on more debt just to boost your credit score. Always consider your affordability before taking out any new line of credit.

If you tend to incur debt on your credit cards, get help from credit card consolidation companies and boost your credit score by being current on your monthly obligations. Take the required steps to boost your score in case your score gets tarnished. Maintain an exceptionally good score to obtain the best loans in the market.

Contributed by Debt Community Member.

Don’t get into trouble with your credit rating! Read more about credit score ranges and ratings on this blog.