What Makes Up Your Credit Score
Having a strong credit score is essential to achieve your financial goals. Whether you want to buy a new home, a new car, or get financing for a special project, boosting your credit score is critical. A good credit score increases your likelihood of being approved for a loan or credit card and can lead to lower interest rates, potentially saving you significant money over time.
Ryan Parrish, Senior Vice President of Consumer Lending for First Financial Bank, breaks down what makes up 100% of that number to help you boost your credit score:
35% - On-Time Payments
The more on-time payments you make, the stronger that 35% will be. Consistently making payments on time demonstrates to lenders that you are reliable and capable of managing your debt responsibly. Conversely, late or missed payments can severely damage your credit score.
Set up autopayments to ensure your payments are made and reduce the risk of forgetting.
30% - Credit Utilization
Utilization, or revolving usage, is the ratio of your credit card balances to your credit limits. In other words, it’s how maxed out your credit cards are. For instance, if you have a $10,000 or more credit limit and you owe $9,000, you are 90% maxed out on that credit. That can be detrimental to your score.
Keeping your balances on your credit cards low compared to your limits gives you a lower credit utilization ratio. This indicates that you are using a small portion of your available credit, which lenders view as a good thing. Utilization makes up 30% of your credit score.
15% - Credit Age
This 15% is how long you've held your credit. Lenders look at the average amount of time you have been paying down every loan you currently have. The longer credit history, the better.
This is one reason payday loans are detrimental to your credit score. These loans have such short terms, they lower your credit history average, negatively impacting this 15% of your credit score.
10% - Credit Mix
Your credit mix is the different types of credit you have, such as auto loans, student loans, mortgages, and credit cards. Having a diverse mix of credit accounts can have a positive impact on your score.
10% - New Credit
The final 10% of your credit score is the new credit you've recently acquired. When you are approved for a new credit card or loan and immediately begin managing the debt responsibly with on-time payments and low balances, this can boost your credit score.
Be mindful that when you apply for new credit, a hard inquiry is typically made on your credit report, which can cause a small, temporary dip in your score. If you apply for credit frequently or open multiple new credit accounts in a short period of time, it could signal to lenders that you may be a high-risk borrower.
Monitor Your Credit Score in our Mobile App
First Financial Bank customers have access to our convenient mobile app, where you can monitor your credit score, credit usage, account mix, payment history, and credit age. This feature also gives you tips to reach your credit score goals and alerts you whenever inquiries are made on your credit.
Your Helpful Credit Guide
The relationship managers at First Financial Bank are here to be a helpful guide when you need education on how different credit situations may impact your overall financial health.
To connect with a lender near you, fill out the contact form at this link, or you can find a branch near you here. You can view our loan options at this page.
Let us know how we can help you reach your goals!