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There’s no doubt about it; your credit is important. It affects everything – from whether you can get a loan or not to how much interest you’ll pay on the loan. So it’s no wonder that people are always looking for ways to improve their credit scores. 

But what actually goes into calculating a credit score? There are five main factors, such as payment history, credit utilization, the amount of debt you owe, types of credit, and new credit. Let’s take a closer look at each one.

Your payment history

Your payment history is vital in managing your credit and accounts for 35% of your score. Lenders want to see that you have a history of making on-time payments. If you have missed payments, or made late payments, it will negatively impact your score. 

The best way to improve your payment history is to simply make all of your payments on time, every time. If you have already missed payments, you can try to negotiate with your lender to have them removed from your report. 

Another option is to set up automatic payments, so you never have to worry about missing a payment. 

Your credit utilization ratio

This is one of the most important elements that affect your credit score. It is the percentage of your available credit that you’re using at any given time. For example, if you have a credit limit of $1,000 and you owe $500, your credit utilization ratio is 50%. 

Credit scoring models generally recommend keeping your credit utilization ratio below 30%. So, using too much of your available credit can have a negative impact on your score.

Your mix of credit accounts

Your mix of credit accounts refers to the types of accounts you have, such as credit cards, auto loans, and mortgages. Having a diverse mix of accounts can be beneficial to your credit, as it shows that you’re responsible for using different types of debt. 

On the other hand, having too many open credit accounts can be seen as a risk by lenders, as it can indicate that you’re struggling to keep up with your payments. 

Therefore, it’s important to strike a balance with your mix of credit accounts in order to maintain a good credit score.

The amount of debt you owe

The amount of debt you owe can also affect your credit score. This is because creditors often report your balances to the credit bureaus. If you have a high balance in relation to your credit limit, it may hurt your score. On the other hand, if you keep your balances low, it could improve your score. 

In addition, the type of debt you have can also affect your score. For example, credit card debt is generally seen as less risky than other types of debt, such as student loans and auto loans. As a result, carrying a balance on your credit card is not likely to impact your score as much as having a high balance on another type of loan would.

How often you apply for new credit

When you’re trying to build or improve your credit, there are a lot of things to consider. One important factor is how often you apply for new credit. Each time you apply for personal loans in Fayetteville, NC, for example, the lender will likely do a hard inquiry on your credit report. This can temporarily lower your score. 

So, if you’re planning on applying for new credit, it’s best to space out your applications so that they don’t all happen at once. Otherwise, you could end up doing more harm than good to your credit score.


Before applying for a loan, it’s important to ensure that you have a good credit score. Knowing the factors that can possibly affect your credit score is the first step. Then you can take further steps to ensure you are ticking the right boxes when it comes to keeping a good credit record and maintaining an excellent credit score.