Whether you’re in the market to finance a car or secure a mortgage, your credit score plays a key role. The rating ranges from 300 to 850 and is reviewed by most lenders to determine how you manage debt. It also drives loan approval and what type of interest rates and fees will be assessed. The following guide highlights what factors affect your credit score and how you can improve it.

How Your Credit Score Is Determined

One key factor is the amount of outstanding debt, which is also known as the credit utilization ratio. It makes up approximately 30% of your credit score. Lenders compare how much credit you’ve accumulated to the amount that creditors have given to you. Payment history also impacts your credit score. From car and student loans to credit cards, your track record makes up 35% of your score. 

The different types of credit you have is another factor. For example, installment debt like car loans and revolving debt such as credit cards are included. This mix makes up 10% of your credit score. How long you’ve had credit is another element and is 15% of the rating. The age of your oldest loan or credit debt is divided by the average age of all your accounts. The longer you’ve had credit, the more it could raise your credit score.

Applying for new credit can also affect your score. Soft inquiries such as getting insurance quotes don’t have an impact. However, multiple hard inquiries, including applying for credit cards, can lower your score. 

How Can You Manage Your Score?

One of the best ways to improve or maintain a high credit score is making consistent and on-time payments on all outstanding debt. Avoid maxing out credit cards and applying for multiple loans at once. Even if you pay off the balance in full on credit cards, don’t close them out. This may have a negative impact on your score. 

Having a higher credit score will typically mean receiving lower interest rates on loans, which can result in affordable monthly payments. Some lenders will also waive certain processing and annual fees on credit cards if you have a strong credit score. When turning on electricity, water, and other utility services, some companies may also waive the deposit if your score is high.

With time and due diligence, you can improve your credit score. Coastal Finance Company in Savannah, GA, is in the business of not only providing consumers with affordable consumer loans, but helping them make responsible financial choices. This local lender has loans available up to $5,000. To apply, complete the secure and confidential application online. Stop by the office to apply in person or call (912) 303-9979 if you have questions.