The high three-digit credit score is something that all of us want to maintain. A lot of our big purchases like a car or house depending on the kind of credit score we have. Is a bad credit score affecting your ability to buy a new house? How do we know what is affecting our credit score? Here are some common factors that affect credit score.

Payment History
Hands down, this is the most important factor that affects your score. When you rack up pending payments on your credit card, it negatively impacts your credit score. This shows a lack of trust with borrowed money as you have a tendency of not paying it back. Banks and lenders have to be sure that you will pay them back in the end.

Credit Utilization
This utilization ratio is calculated by dividing the credit you are using at present by your total revolving credit limit. This ratio tells lenders how much your available credit you are using and also tell them how dependent you are on non-cash funds. If you use more than 30% of your credit utilization, it negatively affects the score.

Credit History Length
The amount of time you have had credit accounts also impacts your overall score. This history contains the age of the oldest credit account you have, the age of the latest credit account, and the average age of all the accounts you have. If you have a long credit history, it generally gives you a higher credit score.

Credit Mix
A credit mix refers to the different kinds of credit accounts you have and how well you manage them. Those who have a near-perfect credit score generally have a range of accounts like a car loan, student loan, mortgage, or other accounts. When a lender calculates your credit score, they consider these different accounts and also check how regularly you pay back the money.

New Credit
If you’ve opened a few new credit accounts recently and have made inquiries about them very often from lenders, it can reflect badly on you. When lenders lend you money, they ask many difficult questions about your credit score. So if you have had many inquiries in the past, it may indicate increased risk and can decrease your score.

Revolving Credit
This kind of credit refers to credit cards but can also be associated with some kinds of home equity loans. If you have a revolving credit account, you get a credit limit and a minimum amount of monthly payments that need to be made. This kind of credit doesn’t usually have a fixed term and is subject to fluctuate.

These common factors that affect credit score should be kept in mind and we should always strive to keep a good credit score if we hope to purchase some luxuries in the future.