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What Determines Your Credit Score

Understanding your credit score is an important part of the car buying and financing process. An overwhelming majority of car buyers rely on their credit in order to get a good car, one of the reasons you may hear that credit is so essential.

A credit report tells lenders how responsible you are financially, and is typically determined by your credit history. This is a list of details about your past and current credit accounts, documents, and lender requests. Typically published by the Fair Isaacs Corporation (FICO), your credit score ranges from 300 to 850.


Your credit score is composed of five components:

  • Payment History
  • Amounts Owed
  • Length of History
  • Types of Credit
  • Account Inquiries

Payment history accounts for roughly 35% of your score, and is higher if you are always on time with payments. Amounts owed makes up 30% of your score, and the length of credit history is about 15% of your score (typically the older the credit, the better). Lenders want to see that you can handle long-term debt and manage your finances well. The types of credit used and the number of account inquiries make up about 10% of your score each. You don’t want an overwhelming number of inquiries or types of credit, as this may imply you are sinking into debt.

What can you do to increase your score? Put simply, paying your bills on time and building a credit history are the best things to do. Being responsible with revolving credit (using less than 30% of your limit) is important as well. If you have difficulty managing your debt, consult a professional in order to help you achieve your financial goals.
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