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Lenders, including auto dealers and mortgage brokers, use credit scores to determine the risk of lending to a given borrower. With possible scores ranging from 300 to 850, credit scores reveal someone’s history for paying bills and being responsible.

Payment history is the biggest contributor to the score, comprising 35%. It looks at a borrower’s loan repayment history, timeliness of credit card payments, and any accounts charged off or assigned to collections.

The amounts owed make up 30% of the score. Important factors include a borrower’s total available credit, how much is owed on specific accounts like credit cards and mortgages, and the total amount owed.

Credit scores also consider the length of credit history. A longer history usually scores higher, but short histories can be fine as long as debts and bills have been paid on time and the debt hasn’t grown too large. This comprises 15% of the score.

New credit is 10% of the score. Opening several new accounts poses greater credit risk because people use credit when they’re having cash flow problems.

And the last 10% considers the types of credit in use. This is the number of credit cards, store accounts, installment loans and mortgages a borrower has.

Remember that less is generally more. That means the less credit used and debt incurred, the better. Managing credit responsibly is the key to achieving a high credit score.

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