Many people don’t know that their credit score isn’t great, until something happens to alert them – such as being turned down for a new credit card, or offered a high rate on a mortgage or other loan. Once that happens, they are often surprised and distressed to find that their credit has been tarnished in some way, and they often struggle to understand how this could happen.

If you pay your credit card bills on time every month, you might think that’s all you need to have a great credit score. But this isn’t true; a lesson that some people, and perhaps you, have to learn the hard way. The reason for this is simple: payment history isn’t the only thing that matters to potential lenders.

The factors that influence your credit score

There are five things that go into calculation a credit score: payment history, debt to available credit ratio, amount of new credit, length of credit history, and types of credit. Each of them means something very specific, and each is weighted differently – but each one matters, if you want to have the highest possible score.

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Payment history does matter the most; it consists of about 35% of your score. So if you make all your payments on time, that’s a great start to a high score. But the second most important factor is debt to available credit ratio. This is the amount you owe, relative to the amount of credit you still have left. This is worth about 30% of your credit score, so it’s quite an important number. Thirty percent is a good thing to keep in mind, because you want to make sure you keep your debt level at about 30% of your available credit at all times, at the very most. Below 10% is even better, if possible

This means that if you have $10,000 of available credit across several different credit cards, you want to keep your revolving balance at $3,000 or less. If your cards are maxed out, your credit score will begin to suffer.

The other factors, while still important, are less important: keep your payments on time, and your debt to credit ratio low, and chances are, you’ll have good credit.

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