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Do you understand the value of a credit score? More importantly, do you know what affects your credit score? 

A credit score determines the creditworthiness of an individual. It’s a numerical value based on information provided on your credit file or credit report. Some people don’t give much thought to their score, yet it plays a major role when buying a house or car, and even when applying for insurance and utilities. 

Here’s a look at five main factors affecting your credit score.

1. Payment History

Payment history makes up the biggest percentage of your credit score. In fact, it makes up 35% of your score. 

Not only does this category consider your positive payment history, it considers your negative history as well. Having late payments on your credit report will lower your credit score. It only takes one 30-day missed payment to have a big negative impact. 

The good news is that it’s possible to re-establish and maintain a good payment history by making on-time payments, disputing inaccurate information on your credit report, paying down debt and taking care of any outstanding balances. 

When applying for loans, lenders will look at your payment history as a good indicator of whether you’re a likely candidate to repay a debt.

Related: 10 Ways to Use Credit Responsibly

2. Amounts Owed

The amount you owe is the second largest percentage that affects your credit score, making up 30%. 

Lenders evaluate the amount of available (revolving) credit in use. And unfortunately, using more than 30% of your available credit line sends a red flag that you’re possibly overextended. 

To calculate your credit utilization ratio, add up your total revolving balance and divide this number by your total revolving credit limit. 

For example: If you have a credit card limit of $500, and you’re using $300 of this limit, your credit utilization ratio is 60%. You can lower this percentage to under 30% by using no more than $145 of your $500 credit limit.

Related: 17 Ways to Get Out of Debt Faster

3. Length of Credit History

Length of credit history is 15% of your credit score. Usually, the longer the credit history, the higher your credit score. 

Your credit history considers how long you’ve had all credit accounts, the age of your oldest account, and whether you’re currently using your accounts. 

If you don’t have a credit history, obtaining a secured credit card might be an option for you. These cards are easier to get with bad credit and no credit history. Your credit line will equal the amount of your security deposit. So if you give the bank a $500 security deposit, you’ll get a secured credit card with a $500 credit limit. Some banks require a minimum security deposit between $250 and $500. 

However, some secured credit cards don’t have minimum security deposit requirements. This includes the Chime Credit Builder secured card. But like similar cards, the money added to your Credit Builder account is held as collateral, and you can only spend up to this amount. Use the card for everyday purchases and start building or rebuilding your credit history.

Click here to open a Chime Credit Builder secured card.

4. Credit Mix

Credit mix affects 10% of your credit score. Having diverse types of credit in good standing is also an indicator of creditworthiness. 

Different types of accounts can range from credit accounts, loan installments, student loans, mortgages and even car loans. It’s not a necessity to have “every” type of credit, but this shows that you’re capable of managing different types of credit accounts.

5. New Credit

Before you start applying for a ton of credit card offers, keep in mind that new credit also affects 10% of your credit score. 

Opening several new accounts within a short period of time might indicate risky behaviors, which can turn away lenders. 

Too many credit inquiries, especially hard inquiries can hurt your credit score. If you already have credit cards, use the ones you have. If you choose to apply for a new credit card, choose wisely and only apply for those that offer the best chance of approval.

Final Word on What Affects Credit Scores

Credit can affect your ability to get a mortgage, buy a car, and it can even affect your insurance rates. It takes time to build a strong credit score, so be patient. The key is making responsible choices with your credit—and of course, understanding the key factors that affect your credit score.