"𝙒𝙝𝙖𝙩 𝙞𝙨 𝙢𝙮 𝙘𝙧𝙚𝙙𝙞𝙩 𝙨𝙘𝙤𝙧𝙚 𝙘𝙤𝙢𝙥𝙤𝙨𝙚𝙙 𝙤𝙛?"
The five components that make up your credit score are:
𝓟𝓪𝔂𝓶𝓮𝓷𝓽 𝓱𝓲𝓼𝓽𝓸𝓻𝔂 (35% 𝓸𝓯 𝔂𝓸𝓾𝓻 𝓬𝓻𝓮𝓭𝓲𝓽 𝓼𝓬𝓸𝓻𝓮) This is the most important part of your credit score. Basically, payment history means what it sounds like: Do you pay the people you owe on time? This applies to school loans, credit cards, etc.
𝓐𝓶𝓸𝓾𝓷𝓽𝓼 𝓞𝔀𝓮𝓭 (30% 𝓸𝓯 𝔂𝓸𝓾𝓻 𝓬𝓻𝓮𝓭𝓲𝓽 𝓼𝓬𝓸𝓻𝓮) Think of this as your spending limit. (This is the credit utilization we talked about above). You never want your credit card balance to be more than 30% of your spending limit. Aliche says credit card companies have this little trigger that says, " 'Danger, danger, danger, she's using too much of her card. She must be in financial trauma and turmoil.' And so that's why they punish you by bringing down your score [if you spend more than 30% of your credit limit]. Because if your score is low, guess what? You can't qualify for more debt. You see, they're literally slowing you down." So 30% is a new 100%.
𝓛𝓮𝓷𝓰𝓽𝓱 𝓸𝓯 𝓒𝓻𝓮𝓭𝓲𝓽 𝓗𝓲𝓼𝓽𝓸𝓻𝔂 (15% 𝓸𝓯 𝔂𝓸𝓾𝓻 𝓬𝓻𝓮𝓭𝓲𝓽 𝓼𝓬𝓸𝓻𝓮) The longer you've had credit, the stronger this part of your credit score will be. Keep your oldest credit card open and pay off a small, recurring bill each month on it and you shouldn't have to worry much about this 15%.
𝓝𝓮𝔀 𝓒𝓻𝓮𝓭𝓲𝓽 (10%) Each time you open a new line of credit (think: applying for a loan or new credit card), this 10% of your score is affected. You can lose points just by applying for a new credit card, so make sure you don't apply for new credit unless you really need it. Buying a car or trying to get approved for a rental is probably worth it. But is that fourth credit card worth it? Maybe not.
𝓒𝓻𝓮𝓭𝓲𝓽 𝓜𝓲𝔁 (10%) You don't need to do anything for this component. Lenders just like to see that you have a mix of credit such as revolving credit like a credit card, and some installment credit loans, like a mortgage. "They just like to see that you have a mix," Aliche says. "The longer you live, the more of a mix you'll have."