Having a good credit score can help open important financial doors in life. A strong score can help you buy a home, apply for an auto loan, or even lease an apartment, for example.

On the other hand, a lower credit score can make it more difficult to get favorable terms on a loan or mortgage. That’s because your credit score represents how responsible you are with your finances, so lenders may view a lower score as having more financial risk.

Credit scores can range from 300 to 850, with anything above 680 typically considered to be “good.” Scores aren’t fixed, but can move up or down depending on a range of factors. Here are five key factors that can impact your credit score.

Payment History

Your payment history has a significant impact on your credit score. Simply paying your bills on time, every time, can be the difference between an average and exceptional credit score.

Debt Amount

The amount of debt you owe compared to how much credit you have available is also an important consideration. Taking out a loan or using your credit card won’t necessarily hurt your score, but taking on too much debt could have a negative impact. Pay attention to your balances and use your credit responsibly.

Length of Credit History

Another important factor to be aware of is your credit history. If you have a history of making payments on time, your score will benefit. Opening and closing credit accounts frequently could hurt your credit score.

Debt Type

The types of debt you carry also matter. The two main categories of debt are: 

• Installment debt: This is a loan repaid by the borrower in regular payments over a set period that includes principal and interest. Auto loans and mortgages are types of installment debt.
• Revolving debt: This is debt, such as a credit card, that’s owed to a creditor who sets monthly payments based on your current balance. You don’t need to have both types at one time, but having a history of responsibly using different debt types could help improve your score.
   

Credit Inquiries and New Debt

Every time you apply for credit, an inquiry will appear on your credit report. Having too many inquiries in a short period of time can hurt your score. One exception: when shopping for a mortgage or auto loan, multiple inquiries within a short timeframe will be counted as one.

Take Steps to Maintain a Good Score

By understanding the factors that affect your credit score, you can make smarter financial choices, strengthen your score, and build a solid foundation for the future.