If you have never used credit before, you may not know what your credit score is. This is why it's so important to quickly learn how to build credit. There are many steps that you can take to build your credit score. It is important to start building a credit record. Most cases, this will require opening a credit card.
Credit mix
It is important to consider the credit mix in determining your credit score. Your credit score will also be affected by your percentage of revolving and installment credit. Your credit utilization is also a key component of your credit score. You will have lower credit utilization percentage if you have a combination of revolving as well as installment accounts.
Payment history
Your payment record is one of the most important factors in your credit score. Your payment history shows lenders how often and reliably you make your payments. It is essential to your credit score. Late payments and missed payments can lead to a lower score. You can improve your payment history with a few simple steps.
Credit utilization
The credit utilization percent is the amount of credit you have used compared to your total credit. It's calculated simply by adding your current balance to your total credit limit for all accounts. Logging into your credit card account will usually provide this information. It is also possible to calculate your credit utilization using the Bankrate.com credit utilization calculator. 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
Credit history has a significant impact on your credit score. While it accounts for 15%, there are other factors that can impact your credit score. Your score will increase the longer you have had a credit history. Lenders prefer to offer loans to customers with a longer credit history.
Interest rate
If you're new in the world of credit, it might be tempting to ask, "What credit scores do you need?" FICO scores and VantageScores average 300. This is however not where you'll start. In fact, it's likely that your initial credit score will be around the 500 mark. As you establish yourself as a responsible credit user, your credit score will quickly climb.