Key Factors That Can Raise Your Credit Score:
- You do not apply for a lot of new accounts. Having a lot of inquiries on your credit report worries lenders, because it is a sign that you may use credit and loans to supplement your income, and might be spending beyond your means.
- Credit Cards allow you to both spend money and decrease debt; unlike mortgages or installment loans where you only decrease debt. Lenders like to see multiple credit cards on your credit report, because they are able to use them to better determine your ability to manage your spending.
- Lenders recognize that obtaining and maintaining a mortgage requires more skill and discipline than other account types. This makes them more confident in your ability to take on new accounts and still meet your financial obligations.
- You do not have any Public Records (i.e. bankruptcies, tax liens, and court judgments) on your credit report. Lenders see these issues as major barriers to extending additional credit.
Factors That Can Lower Your Credit Score:
- Missing payments is the most damaging thing you can do to your credit. The purpose of a credit score is to help lenders predict whether or not you will miss payments in the future, so even a single missed payment can significantly lower your score.
- When you have spent more than 90% of your available credit on a credit card, lenders perceive this as a sign that you are living off of your credit cards because your income is not large enough to cover your expenses. This leads them to believe that you might not be able to afford the payments on future lines of credit.
- You have spent more than half of the credit that has been extended to you, and lenders see this as a sign of irresponsible credit behaviour. Ideally, you would pay off your balances every month or at least keep your credit-to-debt ratio under 15%.