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Less than half of Americans can answer this question about credit scores

Kathleen Elkins

Your credit score, which is represented as a number between 300 and 850, is a crucial component of your financial health. The better your score , the more likely you are to get a good deal on a home , car or any other loan.

But the results of surveys and money IQ tests show that there's a lot of confusion when it comes to credit. In fact, 25 percent of millennials don't even know what a credit score is .

As part of a six-question money quiz , personal finance site GOBankingRates stumped more than half of its 2,000 respondents with this question about credit: "True of false: Income does not impact your credit score."

The answer is "True," since your income does not directly affect your credit score. Only 40 percent of respondents got it right.

Here are the five factors that do affect your FICO credit score, the most popular scoring system out there:

  • Payment history (35 percent): Your repayment of past debt, whether it be credit card debt or a mortgage, is the most important factor because it helps determine how you'll handle future payments. You want to make consistent, on-time payments to improve your credit or maintain a good score.
  • Amounts owed (30 percent): This category is credit utilization, which is the ratio of how much you've spent on your credit card versus the card's limit. Ideally, you want t o use under 30 percent of your available credit.
  • Length of credit history (15 percent): How long you've had an account open and the time since your most recent transaction also affects your score. Newer credit users may have a harder time getting a high score since there's less data available on payment history.
  • Credit mix (10 percent): Your score considers the types of credit you use, like credit cards, retail accounts, installment loans and mortgage loans.
  • New credit (10 percent): Opening up new credit cards, especially at all once and if your history isn't established, can count against you. Too many hard inquiries, such as those that occur when you're applying for an apartment or signing up for a new card, can impact your score negatively, while soft inquiries, such as background checks, do not.

Now that you know what factors affect your score, read up on ways to boost a bad credit score . Or, if you don't have any credit at all, check out these tips on how to establish it.

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