A good credit score can make your financial life a lot easier. It allows you to get approval for almost any type of loans easily. These include mortgage loan, college education loan, credit card, etc. In addition, the interest rate you receive will be one of the lowest available, which means a huge saving to you.

Thus it is important to understand what factors can affect your credit score and what you can do about it:

1. Your record of paying bills

You ability to pay bills is important to lenders and one way to see if you got that ability is to look at your payment history. If you pay your bills on time, this is a good indication that you can handle your money well. Lenders will likely view you as low risk to them.

One or two late payments may not hurt your credit score much but a dozen of them will put a huge dent in your score.

2. The amount of money you owe

The total combined debt from credit card, mortgage, auto loan and other loans are being considered here. But revolving debts (from credit card and line of credit) deserved a closer look.

Revolving accounts have upper limit and the closer your debts are to the limit, the more your credit score will suffer. It is advisable to use no more than two-third of the available credit limit.

3. How long do you have credit?

In general, the longer you have credit, the better it is for you. There are exception cases where you can get good score even with a short history. But most of the time, longer history has a more favorable impact on your score.

4. When was the last time your apply for credit?

Opening a new account can bring your credit score down, especially if you apply for a lot of credit within a short span of time. Applying for ten credit cards in a month will be more detrimental to your score than if you do it over a period of a year.

Applying for credit also give lenders a chance to inquire about your credit report. When there are too many inquiries into your credit history over a short span of time, your credit score will take a dip fast.

5. What type of credit do you have?

To get a good score, having a good mix of credit is beneficial. Besides credit cards, you may have other loans like auto insurance, mortgage or personal loan, which can have a positive impact on your score as long as you have managed them well.

Although it is advisable to start building a good credit score as early as possible, it is never too late to get your credit fixed even if you have a poor score now. If you are having bad credit now, focus on making payment on time and control your expenditure while you learn the ropes of repairing your credit.