The 5 Critical Factors That Affect Your Credit Score And How To Improve It
By: Andrew Kirima
Tags: Finance, Fintech, Credit Score, Credit Cards, Credit Repair

Photo by Avery Evans on Unsplash

When was the last time you checked your credit score? Such an integral part of the quality of your life yet it can feel so intimidating and excluding. Well, we at Sencha Credit want to fix that. We want to be inclusive to all, regardless of your past credit history, so you can live a happy life. First, let’s make sure you understand what a credit score is and what defines it.

A credit score is a number that usually ranges from 300–850 that details a consumer’s creditworthiness.

“Creditworthiness is how a lender determines that you will default on your debt obligations, or how worthy you are to receive new credit. Your creditworthiness is what creditors look at before they approve any new credit to you.”- Thomas Brock

Meaning, if you have a high score, you’re more likely to get better rates and vice versa. Every consumer is associated with a multitude of credit scores that are created from a variety of companies, but there’s one that trumps them all. Stemming from the Fair Isaac Corporation comes the universal FICO score, which 90% of the top financial intuitions use to determine your creditworthiness.

Critical Factors

There are 5 major factors that impact your FICO score: Payment History, Amounts Owed, Length of Credit History, Credit Mix, and New Credit.

Payment History: 35% of your FICO score attributes to your track record of making minimum payments by the due date. For whatever payments you have accrued, such as loans, rent, bills, etc. are you paying them on time?

35% of your FICO score attributes to your track record of making minimum payments by the due date. For whatever payments you have accrued, such as loans, rent, bills, etc. are you paying them on time? Amounts Owed: 30% of your FICO score is calculated by dividing your total debt by your total credit limits. How much of your borrowing potential have you used? More specifically, what is your credit card balances?

30% of your FICO score is calculated by dividing your total debt by your total credit limits. How much of your borrowing potential have you used? More specifically, what is your credit card balances? Length of Credit History: 15% of your FICO score is the average age of your active credit lines. How long have you been using your credit?

15% of your FICO score is the average age of your active credit lines. How long have you been using your credit? Credit Mix: 10% of your FICO score is determined from the different types of active credit lines you have (e.g., mortgage, credit cards, student loans, etc.). How many types of credit are you using?

10% of your FICO score is determined from the different types of active credit lines you have (e.g., mortgage, credit cards, student loans, etc.). How many types of credit are you using? New Credit: 10% of your FICO score is evaluated by the new line of credit that you’ve requested. How much of your credit is new?

All these factors are critical to assessing your creditworthiness as a consumer, so you must be aware of how to improve your credit.

Traditional Solutions

If you haven’t already, apply for and open up your first credit card. Try to only make small charges you can pay off easily. Make sure to pay your bills on time. Simple, if you have a constant source of income. Apply for new lines of credit. For example, apply for a new loan and pay it off within the allotted time of the payment plan as agreed upon.

Our solution

Use the Sencha Card to build your credit effortlessly and hassle-free. Regardless of your credit history, you will be approved to use our card. With our card we provide you a debit-style experience, what you deposit is what you can spend and we work on the back end to build your credit. This means you will never have to worry about missing a payment or going into debt. You win!