Building Credit

Most Important Factors Affecting your Credit Score

Payment History

The largest majority of your credit score will be made up of your payment history. The goal here is to always pay your bills on time, without carrying a balance. The easiest way to achieve this is to:

  1. Use your Credit Card as if it was a Debit Card by not spending more money than you have
  2. Setup recurring automatic payments, paying off the entire statement balance, not just the minimum balance
guy holding a credit card while on his laptop

Credit Utilization

The second most important factor is Credit Utilization. This refers to the ratio between how much credit you have available vs how much credit you use. Generally, we want to try and keep this number less than 10% to increase our credit score, but the lower the better. 

Put another way, if you have $10,000 of available credit to use, you should aim to charge $1,000 or less to the card each month. 

Length of Credit History

The longer the average age of your open accounts are, the higher score you will have. This is why if you want to have a high credit score, you need to:

  1. Acquire credit cards early on to begin your credit history sooner rather than later
  2. Ensure not to close credit card accounts, especially your first credit card. 

 If you are tempted to close your first card due to it holding an annual fee, see if it’s possible to downgrade the card to one without a fee.

stacks of papers


When you apply for any form of credit, the company will issue an inquiry onto your credit report to determine your eligibility. This will lower your score slightly in the short term, but will easily recover if you do the three steps listed above. 

This does mean that you should be cautious of this effect, and not go applying for 5+ credit cards in a single month. 

Otherwise, the credit card companies may think you have gone off the deep end. 

so what should you takeaway?

Building a strong Credit Score is important for:

  • Getting approved for Mortgages / Rental Applications
  • Lowering your interest rate on loans to reduce money paid in interest
  • Qualifying for top tier Credit Cards  

While Credit Cards often get a bad reputation for putting people into debt, used responsibly, they can be a crucial tool to build a credit score, get lots of money cashback, and unlock awesome hotel / travel perks.