What Really Affects Your Credit Score: Understanding the 5 Factors

Are you struggling to understand how your credit score is determined? Do you want to take control of your financial future? If so, you're in the right place.

As a finance industry expert, I know how confusing credit scores can be. That's why I'm here to break it down for you. In this article, we'll discuss the five factors that affect your credit score and how you can improve each one.

The Five Factors That Affect Your Credit Score

1. Payment History (35%)

   Your payment history is the most critical factor in determining your credit score. Making on-time payments is crucial to building a positive credit history, while late payments can have a negative impact on your score. To improve your payment history, make sure you have accounts on your credit report that reflect on-time payments.

   When it comes to payment history, it's not just about making payments on time. It's also essential to pay at least the minimum amount due each month. If you miss a payment, it can have a significant impact on your credit score. Late payments can stay on your credit report for up to seven years.

   If you have trouble keeping track of your payments, set up automatic payments. This will ensure that your payments are always on time.

2. Utilization (30%)

   Utilization refers to the amount of credit you're using in relation to your credit limit. It's essential to keep your balances low to benefit from utilization. Being close to your limit can negatively impact your credit score. For example, if you have a credit card with a limit of $5,000 and a balance of $4,000, your utilization rate is 80%. This high utilization rate can have a negative impact on your credit score. To improve your utilization rate, aim to keep your balances below 30% of your credit limit.

3. Length of Credit History (15%)

   The length of your credit history is based on the oldest account reporting on your credit profile. To benefit from this factor, it's important to keep accounts open for a long period of time. Closing accounts can hurt your credit score because it shortens your credit history. If you must close an account, close a newer one instead of an older one. This will help you maintain a long credit history.

4. New Credit (10%):

   Adding new accounts can positively affect your credit, but too many inquiries can have a negative impact. It's essential to maintain a diverse mix of credit, such as credit cards, car loans, and mortgages, to benefit from this factor.

   When you apply for new credit, the lender will run a hard inquiry on your credit report. This inquiry can have a negative impact on your credit score. Try to limit the number of hard inquiries you have on your credit report.

5. Credit Mix (10%):

   Having a good credit mix is essential. It's also important to make payments on time, maintain a low balance, have a long and consistent credit history, and be diversified in your credit mix. Having a diverse mix of credit can positively impact your credit score. This means having a mix of installment loans, such as car loans or mortgages, and revolving credit, such as credit cards. However, don't open new accounts just to diversify your credit mix. Only open new accounts if you need them.

How to Start Your Own Business

Starting your own business can be a challenging but rewarding experience. At Broker Solutions, we offer various courses to equip you with the knowledge and skills necessary to launch and grow your business successfully.

Our courses include the Broker Solutions Academy, Credit Consulting Academy, and Unsecured Business Lines Academy (DIY). These programs cover everything from incorporating your business, obtaining an EIN, setting up a bank account, creating a website, and establishing a client management system. Additionally, our courses provide mentorship, networking opportunities, and access to funding sources, such as traditional loans, venture capital, angel investments, grant programs, and crowdfunding platforms.

Starting a business requires financial investment, and our courses aim to provide cost-effective solutions to help you achieve your business goals. Our team is dedicated to providing you with the necessary tools and resources to succeed in the competitive business world.

Conclusion

Understanding your credit score and the five factors that affect it is crucial to maintaining a healthy financial profile. Payment history, utilization, length of credit history, new credit, and credit mix are all essential factors to consider.

Maintaining a positive credit history is especially important when starting your own business. At Broker Solutions, we provide a variety of resources to help entrepreneurs launch and grow their businesses successfully. Our team of experts can assist with everything from funding and mentorship to marketing and sales strategies.

Don't let a lack of resources or knowledge hold you back from pursuing your business dreams. Take control of your financial future today by understanding your credit score and exploring our available resources. Contact us to learn more about how we can support your entrepreneurial journey.

Invest in Yourself with Broker Solution's Career-Focused Courses

Are you ready to take control of your financial future? At Broker Solution, we offer three courses designed to help you achieve your goals. Our courses include the following:

• Broker Solutions Academy: In-depth training for those interested in becoming a business loan broker. We provide you with the tools and knowledge necessary to become a successful business loan broker, including access to industry professionals, comprehensive training materials, and ongoing support.
• Credit Consulting Academy: This comprehensive course is designed to teach you how to help yourself and others improve their credit scores. You'll learn how to analyze credit reports, identify areas for improvement, and implement strategies to help clients achieve their financial goals. In addition, you'll also learn how to fix your own credit and start your own credit consulting agency. This course provides you with the knowledge and tools necessary to help you achieve financial success while helping others do the same.
• Unsecured Business Lines Academy (DIY): This course is for those interested in securing unsecured business lines of credit on their own. You'll learn how to navigate the lending landscape and gain access to funding sources that can help you start or grow your business.

Our courses are designed to help you start a new career or improve your financial health. Join us and start building a better future. Contact Broker Solutions today!