The top 5 factors that affect your credit rating are payment history, credit utilization ratio, debts owed, tenure of the credit history, new credit, and credit mix. So, if these are bad, they are worse for your credit rating. 

Payment History

The payment history is an important component of your credit score. The moment someone checks your credit history and wants to give you a loan, the most important question in their mind is whether you can repay your loan on time. Factors such as untimely credit card bill payments, payment defaults, the extent of delayed payments, and public records such as bankruptcies, foreclosures, and debt settlements impact your credit score. 

Credit Utilization Ratio/Debts Owed

Your credit utilization ratio is another important factor that affects your credit score. The higher your CUR, the worst it is for your credit rating. The credit utilization ratio indicates how much debt you have out of your available credit limit. Limit your CUR to 40%. However, not owing anything also is not good for your credit score. You should have some debt and make the payments on time to show lenders that you can handle credit well. 

Credit History Length

A longer credit history with timely repayments has a good impact on your credit history. The age of your oldest account and the age of your new accounts are considered to find the average age of all your accounts. However, a credit history full of delayed payments will have a negative impact and is worse for your credit rating. 

New Credit 

Too many new credit accounts added to your credit report can also affect your credit score negatively. Every time you opt for a line of credit, a hard inquiry is conducted by the lender. This will cause your credit score to come down by a few points temporarily. This is because borrowers who have a high percentage of credit accounts are seen as risky. Lenders consider that they will not be able to manage their finances without credit. So, having too many new credit accounts is detrimental to your credit score. 

Credit Mix

The types of credit you own such as credit cards,  personal loans, installment loans, etc. are also important factors impacting your credit score. The credit score is computed by taking into account the total number of accounts you have. However, the percentage of credit mix in determining the credit score is very small. So, it is not a matter of worry if you don’t have accounts in each of these categories. Don’t open too many accounts just to improve your credit mix as it will cause a dip in the average age of your credit history. This is worse for your credit score and credit ratings.