What Is Your Credit Score?

You should know that the better your credit score is, the easier it is to borrow money or get financing. But most people have no idea what actually makes up your score. There are many deciding factors in calculating your credit score, we hope you find this article helpful.

Do you pay on time? Consider this section to be the most important for your credit score. Your payment history makes up a full 35% of your score. This information is on your credit report. Beware that lenders will have access to your payment history whenever you apply for finance. To keep your score higher, always pay your payments a few days early. Lenders will frown on late payers, and may report you even if you’re only late by a few days. This will definitely for sure reduce your credit rating considerably.

How Much Debt You Got? What is referred to by the credit industry as debt ratio makes up 30% of your score. This is described by the debt you owe versus your credit limit. An example of this is if you have a credit card with a spending limit of $500 and you owe $480 this is a very large debt ratio and could have a negative influence.

Definitely if one can reduce their credit card debt to less than 50%, this will positively influence your credit score. Credit bureaus will not differentiate between payers who pay their whole balance or payers who keep their balance below the 50% mark.

How Long Have You Had Credit? The longer your credit has been established, the better. Lenders want to see that you consistently over a long period of time pay your bills. This is the third most important factor within your credit report.

For a high credit rating don’t close paid off accounts. Credit card accounts you have had for some considerable years, it’s a good idea to, leave the account open. This for sure will increase your credit history and in turn increase your credit rating.

What Type of Debt do you have? Whatever type your debt is, this will be responsible for 10% of your total credit score. The three types that lenders look at are instalment loans, revolving credit, and consumer financing. The reason creditors score the difference is because bank loans and consumer financing have set monthly payments.

If your revolving credit makes up most of your credit report, this will look bad on your report. Creditors know that monthly minimum payments will change every month, dependant on how much you decide you want to spend.

Have You Recently Tried To Get More Credit? The high credit scorers have one thing in common, they apply for credit only a few times. This is responsible for 10% of your credit report. Be responsible when applying for credit, as this stays on your credit file for two years. If are getting ready to financing something, limit your credit checks as much as possible.

People shopping around looking for a big purchase like a car, can fall into this trap. You will probably allow a car dealership to run a credit check and run a credit report at each one to see if you’re credit worthy, this will greatly lower you credit score as each credit report is run. Do not let anyone run a report until you are ready to sign on the dotted line.

As you can see this is how your credit score is calculated. Hopefully, a few of these tips will help you raise your score. Your credit score total can be between 300 and 850. Obviously the higher the better for your credit rating.

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