Credit scores are calculated based on several factors:

• Payment History (35%): Whether you pay your bills on time.
• Paying on time means making sure your payment reaches the company by the due date. Think of it like handing in homework — if it’s late, there can be consequences. Paying before or by the due date keeps your credit score healthy.
• Credit Utilization (30%): The amount of credit you’re using compared to your credit limit.

For example, if your credit limit is $10,000, 30% of that is $3,000. This means you should aim to use no more than $3,000 to keep your credit utilization rate low and maintain a healthy credit score.

• Length of Credit History (15%): How long you’ve had credit accounts. This is about how long you’ve been using credit.
• For example, if you’ve had a credit card for 10 years, that shows lenders you’ve managed credit for a long time. Keeping older accounts open helps build trust.
• Credit Mix (10%): The variety of credit types you have. This looks at the different types of credit you use.
• Some examples include credit cards, mortgages, car loans, student loans, and lines of credit. Having a mix of these can boost your score.
• New Credit Inquiries (10%): The number of recent applications for credit.

Your credit report affects whether you can get a loan, rent an apartment, or even get a job. If there are mistakes (like someone else’s debt on your report), you need to fix them!