If you’ve got a good credit score, not only will you get your applications for credit accepted, you’ll also be offered the best deals. If you want to be accepted AND pay less interest along the way, improving your credit score is the answer.

However, much has been written about credit scores and how to fix a problem, but how much does each factor really contribute? Here’s a closer look at the factors that really make a different to your credit score.

Missing or late payments

Everyone knows that late payments aren’t ideal but do they really make much difference to your overall score? If you miss or are late with a payment, you could be surprised at just how much it affects your rating.

Although the way your score is interpreted varies from one lender to another, your payment history makes up a whopping 48% of your total score. This means it doesn’t take much to knock down your rating, even if you eventually catch up with any missing payments.

Any late payments will show on your credit file for up to 6 years but most lenders take into account how recent the missed payments were.

Utilisation of available credit

Put in a nutshell, if you’ve maxed out all of your credit cards and are looking to borrow more, lenders might feel a bit dubious about whether you can really afford it. Up to 21% of the total credit score is based on your utilisation of existing credit.

This doesn’t just include credit cards, but also takes into account mortgages, loans and overdrafts. If you currently owe less than 30% of the total amount available to you your credit score could increase by as much as 90 points, according to credit agency Experian.

How long have you been borrowing for?

This isn’t a factor that many people consider, but it’s worth another hefty 21% of your credit score.

If you’ve been borrowing for a long time, that’s not a negative factor as you might expect. Quite the opposite; long-term credit shows that you’re capable of managing different types of debt and are reliable with repayments.

Lenders aren’t keen on seeing customers who hold lots of short-term lending, or those who constantly switch between different companies. Stability really counts for a lot so think twice before you go chasing down the latest deal elsewhere.

What won’t count

Although the above factors will play a significant role in your credit score, there are some things which won’t make any difference.

Tags: Money Tips