Your credit score may not be known if you've never used credit. You need to learn quickly how to build good credit. There are many steps you could take to build credit. It's important to build a credit score. In most cases, this requires opening a credit card or two.
Credit mix
In determining your credit score, it is very important to take into account the mix of your credit accounts. Your overall credit score is affected by the proportion of installment credit compared to revolving. Also, credit utilization plays a significant role in your credit score. Your credit utilization percentage is lower if you have a mixture of revolving, installment, and other accounts than if only you have installment accounts.
Payment history
Your payment history is one of the most important parts of credit scores. Your payment record shows lenders how regularly and reliably your payments are made. It is vital to your credit score, as late or missed payments will lower your score. Fortunately, there are ways to improve your payment history.
Credit utilization
The credit utilization percent is the amount of credit you have used compared to your total credit. This is calculated by taking the total credit limit of all accounts and your current account balance. Logging into your credit card account will usually provide this information. Bankrate.com has a credit utilization calculator you can use to 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.
Credit history length
Length of credit history is a key factor that affects your credit score. While it accounts for 15%, there are other factors that can impact your credit score. The longer your credit history, the higher your score will be. Lenders prefer customers with a better credit score to be approved for loans.
Rate of interest
If you are new to credit, you might be asking, "What credit rating should you start with?" FICO and VantageScore have an average score of 300. However, this is not the place you should start. In fact, it's likely that your initial credit score will be around the 500 mark. Your credit score will increase quickly as you are a responsible credit-user.