What Impacts Your Credit Score?
Summary
Credit scores often seem like a black box—each bureau has its own formula, and they rarely explain exactly how your score is calculated. But despite the secrecy, there are consistent factors that can help or hurt your score. In this video, Legal & Finance Expert, Daynor, walks through three habits that improve your score (like paying on time and keeping debt low), three red flags that bring it down (like late payments or too many new loans), and the best ways to check your score for free. More than just a loan gatekeeper, your credit history can affect jobs, housing, and insurance—so understanding it is key to unlocking more choices in your life.
Transcript
DAYNOR:
There are algorithms, and it’s a bit of a black box. Each bureau does it differently, and they all like to keep it a little bit of a secret.
DAYNOR: What are some of the key factors that make up your credit score? Three key factors that will have a positive impact on your score are: 1. Paying on time – this shows reliability and builds trust with lenders. 2. Keeping your accounts open for a long time – this contributes to the length of your credit history. 3. Keeping your balances low – this reduces your debt-to-credit ratio, which lenders pay attention to. DAYNOR: Now, here are three negative factors that could bring down your score: 1. Making late payments – this has the biggest negative impact on your credit score. 2. Having a lot of recent credit inquiries – this can signal to lenders that you might be over-borrowing. 3. Opening many new loans at once – this can also signal that you’re overextending yourself. DAYNOR:
Regulations don’t require credit bureaus to provide your score—only your report. But there are ways to access it.
Some bureaus offer your credit score for free. Some creditors will also display your score on their websites.
DAYNOR:
And if you apply for credit and get declined, you’re entitled to a copy of your score and an explanation—especially if the denial was due to your credit score.
DAYNOR: Credit history affects more than just borrowing.
It plays a role in many areas of your life, which is why it’s so important to monitor and maintain good credit.
