You might not be familiar with your credit score if this is the first time you use credit. That is why it is so important to learn how to build good credit quickly. To build good credit, there are many steps you can take. The first step is to establish a credit history. This usually requires opening one or more credit cards.
Credit mix
In determining your credit score, it is very important to take into account the mix of your credit accounts. The percentage of revolving credit versus installment credit is a major factor in your overall credit score. Additionally, credit utilization is an important part of your credit score. Your credit utilization percentage will be lower if you have both revolving and installment accounts than if there are only one or two.
Payment history
Your payment history is one of the most important parts of credit scores. Your payment history will show lenders how frequently and reliable you pay your debts. It is vital to your credit score, as late or missed payments will lower your score. There are several ways to improve the payment history.
Credit utilization
Credit utilization percentage is the percentage of credit that you have used against your total credit. It is calculated by taking your current credit limit and dividing it by your current balance. This information can be found in your credit card account. Bankrate.com also offers a credit utilization calculator that can help you calculate it. For example, if you have a credit card with a $5,000 limit and have spent $500 on it, your credit utilization is ten percent.
Length of credit history
Credit score is affected by the length of your credit history. While it accounts for 15%, there are other factors that can impact your credit score. The higher your credit score, the better. Lenders prefer customers with a better credit score to be approved for loans.
Interest rate
You might be new to the world credit and wondering "What credit score can you start with?" The average score for FICO and VantageScore is 300, but this is rarely where you'll begin. In fact, it's likely that your initial credit score will be around the 500 mark. Your credit score will rise quickly as you prove yourself to be a responsible credit shopper.