Credit Issues: What You Need to Know

What lowers my credit score?

Both negative and positive factors influence your credit score. A couple important factors that could lower your score are listed below, in order of importance. Remember that these factors vary in how strongly they impact your credit score. For example, if you have a very high credit score, the negative factors in your analysis are likely to have a small impact. The same is true for positive factors if you have a very low credit score. Length of Credit History: You opened your first credit account a many years ago. (This may not include accounts you closed more than 7 years ago.) This would make your score lower. Having had credit accounts for a long time is a positive factor because your history gives lenders information to evaluate how you typically use credit and repay your debts. Credit reports with approximately 30 years of history are considered optimal. Meanwhile, up to 7 years of credit history is considered short, and less than 3 years of history is considered too little. It is worth noting that your accounts may have been open longer than your report suggests, if lenders were slow to report them to the bureaus. What matters is how long your accounts have been in your report. Credit Accounts: The average amount of your credit accounts is over $1,000. This includes loan amounts for fixed-payment ("installment") loans as well as limits on your revolving accounts (such as credit and retail cards). This would make your score lower too. Having a high amount of credit is a positive factor because it indicates to lenders that other lenders have trusted you by lending you money in the past. Meanwhile, having a low amount of credit is a negative factor because it indicates that either you are just starting to use credit or you have missed payments in the past. If you are just starting to use credit, lenders do not have information to evaluate how you typically use credit and repay your debts. If you have missed payments, you have demonstrated that you do not pay on time, and lenders may worry that you will not repay them. There are other important factors, but remember the golden rule: Never assume, however, that your credit report is "too bad" or that you don't have enough of a down payment to own your home. Only an informed lender should make that assessment.