The information in your credit report has a ripple effect throughout your entire financial life. How can you get started building good credit? Knowing how credit scores are calculated can help you improve them.
To stay on top of your credit more than once a year, space out your requests and get a free report from a different credit agency every four months at annualcreditreport.com.
Each credit scoring model values the information in your credit report differently and uses a unique score range. The popular FICO Score uses a scale from 300 to 850 and values the following five factors:
Payment history (35%): making payments for bills and credit accounts on time
Credit utilization (30%): having lower amounts of debt relative to your available credit limits on credit cards and lines of credit
Length of credit history (15%): having credit accounts for a longer period of time
Type of credit used (10%): having a mix of credit types, including loans and credit cards
Applications for credit (10%): having fewer requests for new credit accounts
To build good credit, focus on actions within your control that have the biggest influence on typical scoring models. These include paying bills on time and not maxing out credit cards. But remember that it takes time to build good credit—