What are the factors that impact your credit score?
Are you annoyed with your poor credit score? Then this article will help you solve your credit problems
In this article, we’ll explore some of the important factors that affect your credit score.
Let’s first begin with a basic understanding of your credit score.
A credit score is the number used by financial institutions to determine your credit history or in layman’s language; it is the probability that you would pay back your debts. Your credit worthiness is checked whenever you apply for a cash or credit loan. Your score helps a lender determine what’s their risk if they loan money to you.
Credit score is an indication of how financially responsible you are, and if you pay back money in accordance to the terms you agree upon. There are a number of benefits that accompany having a great credit score, but for some folks, building excellent credit can be a difficult process if you don’t have the proper guidance.
Here is a glance at some of the factors that affect your credit score.
Paying your bills on-time
It is very important that you pay all of your bills (including your credit card bills) on-time. Your credit score is determined by the percentage of on-time payments you make. This factor plays a major role in calculating your credit score. Always ensure that you maintain your credit and use it regularly. Pay your monthly bills in a timely fashion. The more late payments, the lower your credit rating will be.
Mismanagement of credit in the past
Mismanagement of credit can include, but not be limited to having a number of derogatory marks like a foreclosure, bankruptcy, tax lien, collection account etc. Having just one single derogatory mark can severely damage your credit score. Even if you hire a credit repair services company they would attempt to address those problems immediately. It can take up to ten years for derogatory accounts to be removed from your credit history and to a lender it indicates that you have mismanaged your credit in the past, so they are likely to not want to lend to you or give you terms that aren’t favorable if they do decide to lend to you.
Total number of accounts you are holding
One other factor that impacts your credit score is the total number of credit cards you hold. Student, auto loans, mortgages and other lines of credit you have taken, if any. Although having a higher number of credit accounts justifies better credit scores as you are approved by multiple lenders. Having multiple revolving credit accounts can have a positive impact on your credit history, but if you find yourself in need of credit repair services (for some other reason) most companies wouldn’t recommend that you have too many accounts.
Usual age of your open credit accounts
Think wisely before you decide to close your oldest credit card account as this would negatively affect your credit score. It would reduce your credit availability, shorten the average length of open credit lines and increase your credit usage rate.
Having a lengthy credit history signifies that lenders or a credit repair services company can seek more accurate information on how you have managed your credit history.
Total hard credit inquiries
Generally, a hard credit inquiry occurs whenever you apply for any kind of loan (Car loan, student loan, personal loan, auto loan, mortgage loan, business loan etc.) or even for any credit card. Your credit history is checked by a financial institution whenever they decide to give you a credit card or any kind of loan.
Having multiple hard inquiries is not good for your credit score as it would communicate to the lenders your desperate to qualify for credit. Always ensure that you avoid doing this.
Lastly, to conclude none of the above factors work independently of each other. Each one plays a significant role in your overall credit score. Credit repair services can be of huge help if you plan to repair your credit score and remove harmful information from your credit report, which can reduce your credit score. Always monitor your credit score, or hire a credit repair services company to improve your credit history.
Share your views on other important factors which affect your credit history or anything you think we can assist you with.