Changes That Affect Your Credit Score

Your credit score determines credit approval with lenders, insurance rates and may even affect employment. Higher scores mean better lending opportunities and lower interest rates. While creditors base lending on various pieces of information on your credit report, your credit score provides a picture of your overall financial responsibility. Your credit report adjusts over time as you pay down debt and acquire new loans. A range of financial changes affects your credit score.

Payment History

At 35 percent of your credit score, your payment history affects your score more than any other information. Payment history includes accounts paid as agreed, delinquencies, debt liens and lawsuits, bankruptcies and payment timeframes. Positive information on open accounts remains indefinitely. Positive payment information on closed accounts remains for 10 years. Most negative information remains for seven to 10 years. The further back negative information is on your credit report, the less likely creditors are to use the information to determine lending.

Amounts Owed

Your total debt accounts for 30 percent of your credit score. The number of accounts and how close you are to credit limits factor into this score. The lower your debt to available credit ratio is, the higher your score. Adversely, having high balances near the maximum credit limit on revolving lines of credit or owing a lot on other loans lowers your credit score. Consumers nearer to paying off debt are less of a credit risk.

Credit Inquiries

Credit inquires from potential lenders for credit cards, mortgages and other loans are called hard inquiries while soft inquires involve checking your own report or when current lenders pull your report periodically. Hard inquires require your authorization and remain visible to all lenders for two years. Hard inquiries do affect your credit score. Soft inquiries do not affect your score and are invisible to everyone but you. While the negative affect of sporadic hard inquiries is minimal, numerous inquiries over a short period may hurt your score. Actual scoring methods and the length of time an inquiry affects your credit score varies by reporting agency.

Account Types and Timeframe

The length of consumer credit history and types of credit used affect 15 and 10 percent of your credit score respectively. As the account ages and time between account activities fluctuates, so does your score. Older accounts with positive information increase credit ratings. Adversely, closing a longtime account potentially shortens your history and alters your available credit-to-debt ratio. Credit reporting agencies look for a mix of credit types when determining your credit score to help lenders establish your experience with different loans. Different types of credit may include mortgages, car loans, unsecured credit lines and revolving credit accounts such as credit cards.