What is Credit Score and how is it calculated?

Credit Score is the foundation of your financial health. A credit score is a number, usually between 300 and 850, that lets lenders know how well you are paying off your debts and how much of a credit risk you are. The higher your credit score, the more likely you are to be given credit at great rates. There are 5 factors that contribute to calculating your credit score: Credit History, Credit Utilization, Length of Credit, Credit Mix, and Credit Inquiries. In this article, let’s explore different ways to boost your score in each category!

1. Credit History – 35%

Credit History is the biggest contributing factor to your credit score. Late payments, collections, derogatories, and other negative marks can stay on your credit report for 7 years!

Here are the top things to do to boost up your score in this category:

  • Always make your payment on time!

Most banks have features to set up automatic payments. You can set it up and forget about it (just make sure that your bank account does not get charged for overdraft fees), or set a reminder every month and make plans to make your payments. Consistency in paying off debt on time is one of the best things to do to improve and keep your scores up!

  • Review your credit report, find inaccuracies, and dispute by mail!

Here are the facts:
Most consumers have never seen their credit reports.
Most credit reports contain at least 1 or more errors.

Because the majority of people don’t regularly audit their credit reports, most credit reports contain inaccurate information. People are also more subjected to being bullied and scammed by the credit bureaus and targeted by identity theft. If you are planning to apply for a mortgage or loans, we recommend talking to a credit expert to help you review your report and give you the best advice on making sure you can get the best rate possible.

To request a FREE consultation with our Credit Experts, click here:

2. Credit Utilization – 30%

Credit Utilization is the second largest factor that contributes to your score. We have also found that improving credit utilization is the fastest way to boost your credit score!

  • THE Fastest way to boost your score: Pay off your debt!

There are many sources online that say to keep your credit utilization under 30%. In our observations, we always recommend our clients keep their balances BELOW 10%. Paying off your debt is THE FASTEST WAY to boost your score.

Here are some simple tips to pay off your debt:

  1. Sort all your accounts/debts by interest rates.
  2. Pay off the ones with higher interest rates first. Compounding debts is dangerous and can financially ruin you.
  3. Make payments as soon as your credit utilization goes above 9%

3. Length of Credit – 15%

Length of credit or length of credit history is another important factor that contributes to your credit score. To maintain this category,

  • DO NOT close your credit accounts!

The older your credit account, the more established it is, the higher your credit score will be. This factor is the reason why many consumers new to credit struggles to get their scores up to the mid-700s. Closing a credit account counterintuitively lowers your score as it lowers your overall credit limit and increases your credit utilization.

  • Add tradelines!

We don’t recommend adding tradelines to anyone. However, if your credit file is too thin, we recommend adding tradelines to start building your credit.

4. Types of Credit – 10%

The more diverse your credit mix is, the more score you are going to receive in this category.

The different credit types are credit lines, mortgages, and loans. It is important to have a variety of mix of credit. However, this is a smaller category and we recommend our clients only to apply for the credit that they need. Our recommendation for this category is:

  • Have 3 different revolving lines of credit.

Review different lines of credit, and apply to have 3 active revolving lines of credit with the best benefits to start building your credit score. If you have other accounts like loans or mortgages, that would help in this category as well, but only take out those loans if you need to.

5. Inquiries – 10%

Applying for new credit is a big contributing factor that affects your score. Inquiries stay on your report for 2 years. Because of that,

  • ONLY apply for new accounts if you need to.


Keeping your credit utilization low and making payments on time are the 2 most important factors to help you boost and maintain your credit. Having a variety of mixes of credit is also very important. However, only apply for new credit if you need to, be consistent and patient. Building credit is like building wealth; It does not happen overnight, but the more you work on your credit, the more doors and opportunities will open up for you.

Our Credit Experts offer FREE Credit Consultation on zoom, going over your credit report and strategizing a plan to improve your credit score! Book a session today before slots run out!


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