While the financial world eagerly awaits the the Federal Reserve Board’s decisions about interest rates, a new working paper was published at the Fed by economists Jane Dokko, Geng Li, and Jessica Hayes. These economists studied at how one of the most important indicators of your financial health, your credit score, can predict how successful you will be in your relationships.
Credit scores (and the credit reports they are generated from) are used by financial institutions to gauge how risky it is to lend money or open lines of credit to you. The details of your credit report, which include your loans, past payments, and credit cards, all factor into your score that is generated. So what actually influences your credit score? Understanding the specific components will help you learn how to improve it, and a better score will lead to lower loan interest rates and more long-term savings.