Your credit score is a number that represents how well you’ve managed all of your financial obligations (your bills, accounts and debts) over time. The number is determined by the three main credit agencies, based on the information in your credit reports.
When you apply for a loan (credit card, car loan, mortgage etc.), lenders wants to know what kind of risk they’re taking by giving you the money — how likely is it that you’ll pay them back?
Read more: Understand your credit report & credit score
Why you need a good credit score
If you have a good credit score, they assume they can trust you, and they’ll give you a better deal.
If you have a bad score, getting a loan will cost you a lot more money or you may not even be able to get one.
And here’s the key: To get a good credit score, you have to constantly keep tabs on everything so you can take steps to manipulate your credit in your favor.
And the way you do that is by understanding what factors make up your score, what damages it and how you can improve it.
There are five main factors that determine your credit score:
- 35 percent: Your payment history
- 30 percent: Amounts owed
- 15 percent: The length of your credit history
- 10 percent: New credit
- 10 percent: Mix of credit
So based on those factors, there are actions you can take to start improving your score! Check out the video above and then see our guide that breaks down every key element you need to know!