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How Can My Payment History Impact My Credit Score?

Top Two Factors that Influence Credit Score

Having good credit is essential in the finance world. Those with good credit are more likely to be approved for loans and receive lower interest rates as these borrowers are deemed low risk. So, what things can impact a person’s credit score? There are many different factors that are taken into consideration.

[ READ MORE: Tips to Lower Your Credit Card Payments ]

Payment History

Loaners want to know if the borrower can pay the money back. Thus, payment history is one of the most important factors that banks look at to determine your credit score. Those that are on time with payments will have a much better score than someone who misses payments or is late.

In addition, the length of time you have your accounts open impacts your credit score. Those that have been paying off bills for 10 years without any missed or late payments will have a much better credit score than someone starting off, even if that person starting off is responsible with their money.

How You Use Credit

Banks look at your overall credit utilization rate. What is this, you may ask? Take the amount of debt you have and divide it by the amount of your credit line. Multiply that number to get a percentage. For example, if you have $300 in credit card debt and your credit line is $1,000, your credit utilization rate is 30%.

Those with high credit utilization rates often charge beyond their means, causing them to quickly build debt and have a hard time paying back. Thus, having a high credit utilization rate can negatively impact your credit score. Experts recommend keeping your credit utilization at 30% or less every month. Simply put, just because you have a credit limit of $10,000, it doesn’t mean you should use all of it each month.

Even if you have bad credit, we want everyone to have access to an affordable and reliable vehicle. If you are in the market for a car, contact us here at Broadway Credit! We will be happy to help you finance for an auto loan that fits your budget.

Close up of a person with coffee checking their credit score on their phone