Building Credit Scores
The first step in building a credit record is to start earning credit. This can be in the form of loans, credit cards, or mortgages. For many Americans, the first form of credit is either a credit card or a student loan. This is because most other forms require existing credit, while a credit card and a student loan have less stringent requirements.
Credit bureaus usually keep their formulas secret, although the main factors affecting the score have been made public. These include the following:
- Payment history: all payments made within the given period, including missed, late, or advanced payments (this usually makes up the biggest chunk of the score)
- Depth of credit: duration of credit history
- Recent credit: new accounts and loans made in recent months
- Credit utilization and balance: total amount of current credit and debt
- Available credit: amount of credit currently accessible