Maja Mirosavljevic
By: mmirosavljevic
Read in 9 minutes

What Affects Your Credit Score? 5 Behaviors with a Negative Impact

Are you aware of what affects your credit score? And most importantly, are you considering taking a loan? Then, this article is a must-read. 

First things first. Your credit score is a three-digit number you can get from your credit report and usually ranges from 300 to 850. The higher this number, the better opportunities you will have to qualify for loans.

Get Approved For A Loan Today

Why is it important to have a high credit score?

Your credit score is one of the factors that lenders use to determine your creditworthiness when you apply for a loan. In other words, lenders will use it when you apply for a loan to check how financially responsible you are. The score serves as a proxy of the probability you will return the money.

So, if your credit score number is high, you are more likely to obtain a loan. In other words, having a good credit score means you will be able to purchase your dream house or car, or maybe start your own business. However, a bad credit score means you’ll need to find other ways to get funds which can bring new challenges and difficulties.

That’s why it’s crucial to build or maintain an excellent credit rating since it may be a decisive factor in achieving your goal. To do so you must understand what affects your credit score. Especially, the behaviors that may be hurting your credit score and how to correct them.

Without further ado, scroll down and learn what affects your credit score and how to put an end to negative behaviors.


What affects your credit score?

There are different credit scoring models, but they all have the same purpose – to determine the probability you’ll repay your debts on time. The scoring models may yield slightly different scores but they should not vary over 20% from each other. These are the factors that are taken into consideration according to FICO Credit Scores.

1. 35% of your score is based on your payment history

Your payment history plays a significant part in your credit score rating because it basically represents proof that you’re a responsible and trustworthy person that will return the borrowed funds. It refers to your payment habits and the existence of any charge-offs, bankruptcies, or debt settlements.

2. 30% is based on current debts

This is the second most important credit scoring factor, and refers to your current debts. In other words, it is the credit utilization ratio that reveals the amount of money you owe compared to your available credit limits.

3. 15% is determined by credit history

Another factor is your credit history. It shows how long you have been using credit, the age of your accounts, and for how many years you have had obligations.

4. 10% is allotted to new credit applications

Even though new credit applications have a low impact on your score, you shouldn’t be neglectful. Your credit score also accounts for the number of new accounts you have applied for lately. FICO models deem you riskier when you frequently apply with new creditors. On the other hand, the scoring models reward you when you stick with your existing creditors, and grow your relationship with them.

5. 10% is about types of current credit

The last factor that is taken into account for a credit score is your current credit. It serves to give insights on the types of credit you have, like mortgages, credit cards, store accounts, or installment loans.

Discover the types of bankruptcies. 

What affects your credit score negatively and how to prevent it?

After answering the question “what affects your credit score”, it’s time to identify what behaviors have a negative impact on it and discover how to prevent them. We have identified 5 common negative behaviors, as shown below:

1. Missing payments

This is the most obvious one. If you don’t pay your bills on time, it will have a negative effect on your credit score. Also, the damage that missing payments can cause depends on how late you are, 30, 60, or 90+ days. The consequences of a 90-day late payment will hurt your credit score more than a 30-day late payment.

Therefore, start paying your bills on time always and regularly diminish the amount you owe. This kind of positive behavior will significantly improve your credit score.

2. Having high balances on your cards

If you have high balances on your credit cards for over 30 days your credit score will deteriorate. It’s important to pay down your credit card each payment cycle so your outstanding balance is equivalent to less than 30% of your credit card limit.

3. Opening new accounts

Opening new accounts can decrease your average age of accounts, which may have a negative impact on your credit score.

However, having a short credit history with a new account won’t hurt your credit score if you pay your bills on time and reduce your debts.

4. Often apply for or open new lines of credit

Whether you often check your credit or if you qualify for a loan, then this can harm your credit score.

When you minimize these inquiries and plan them wisely, you’ll be perceived as a financially responsible person in the lender’s eye.

5. A mix of credit types

Having various types of credits, like credit cards or installment loans, may have a positive impact on your credit score.

However, don’t worry if you don’t have them; you don’t need to open new accounts just to build a mix of credit types. After all, this is a minor factor that affects your credit score.

Does checking your credit score lower it?

Not necessarily. If you check your credit score yourself, using sites like Credit Karma, you can do it as many times as you want with no impact. But beware: if a potential lender or credit card issuer checks your credit score as part of the process of approving you for credit, this may lower your credit score, if they conduct a hard pull.

Learn here the difference between soft pull and hard pull when checking your credit.

Final words

Once you’ve learned what affects your credit score, there are no more excuses for missing payments, having high balances on your cards or opening many new accounts. Start using these practical tips and improve your credit score.

As we have seen, a strong credit score will improve your chances to access a business loan in the future. If you are ready to get the funds to finance your business instantly, apply for a business loan. Camino Financial does a soft pull on your credit that won’t affect your credit score.

Apply For A Business Loan!



Check if you
qualify for a loan