Understanding Credit Scores : The Five Key Criteria
Your credit score , sometimes referred to as your FICO score ( in the US ), is a crucial factor in determining whether you will be approved for a home loan . There are five primary factors that influence your credit score :
1 . Payment History Your track record of on-time payments is the most significant factor in your credit score . Late or missed payments can substantially lower your score .
2 . Amounts Owed This refers to your outstanding balances compared to your total credit limits . Higher balances relative to your available credit limit can hurt your score .
3 . Length of Credit History A longer credit history demonstrates stability and responsible credit management , which helps improve your credit score .
4 . Type of Credit Lenders look at the variety of credit accounts you hold , such as mortgage bonds , car loans , credit cards , and store credit accounts . A healthy mix of different types of credit can be beneficial .
5 . New Credit Opening many new credit accounts in a short period of time can raise red flags for lenders , as it may suggest financial instability .
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