Credit
October 23, 2019
By Emily Jones

You’ve Never Missed a Payment. So Why Don’t you Have a Perfect Credit Score?

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You probably already know that missing a payment or two on your credit card bills or other bill payments could cause your credit score to drop. But if you’ve always paid your bills on time and your credit score still drops, you are probably wondering why?

The short answer is that there are many different contributing factors that affect a credit score. Knowing how your credit score is calculated and what factors make a serious impact can help you keep a perfect credit score.

Before delving into the factors that affect your credit score, you should know about the three national credit reporting bureaus. Equifax, Experian and TransUnion, each calculate your credit score a little differently. Even though the factors used are primarily the same, your credit score may vary a little between the three. That being said, they are usually pretty close.

Credit Factors

There are a number of factors that are used to formulate your score. These include both the amount of accounts you have as well as the type of accounts. Credit card accounts are not the only accounts affecting your credit score. Mortgages, and all types of loans, (even student debt) count when calculating your credit score.

Available Credit

Your available credit is a major factor. Regardless of of your payment history. Credit cards with high balances will affect your score negatively.

Length of Credit History

The length of your credit history is also a determining factor used to calculate your credit score. You won’t receive a perfect credit score right from the start. A history of good credit needs to be established first. Along with this, the length of each credit account is also a factor.

Credit accounts that have been open for quite a while and have a good history will affect your credit score positively. While opening a bunch of recent accounts could lower your score until a good credit history is established with those accounts as well.

Rotating Credit

Rotating credit can also lower your credit score. This is when you transfer balances from one card to another. Credit bureaus frown on this. Even when transferring a high interest rate balance to a low interest rate card.

Credit Score Checks

And lastly, hard inquiries on your credit can also make an impact on your credit score. Note that receiving a bunch of inquiries when shopping for a mortgage or a car loan is understood by the credit bureaus as one inquiry, and typically does not affect your score, so it’s safe to pursue such options without worrying about your credit.

In conclusion, being aware of all the behaviors and factors that can affect your credit score can help you manage your credit better, and may eventually help you achieve a perfect credit score.

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