What are the factors that affect your credit score?
Think you’re qualified enough to apply for a credit card or loan?
Credit reporting companies use a rating called “credit score” to determine whether one is eligible or not to avail of some banking services. Using a borrower’s credit score as reference, lenders figure out all necessary information in credit file to systematically make an approval.
So what are the factors that affect your credit score?
35% of your credit score is based from your payment history. Lenders will track down your previous records to see if you pay on time or not.
So issues like charge-off, repossession, collection, foreclosure, and bankruptcy can bring down your credit score and opportunities for being approved for loans.
Level of Debt
Level of debt comprises 30% of your credit score. Credit companies will gather debt information (if there’s any) such as remaining balance, the ratio of your credit card balances to your credit limit.
High and unpaid balances may put your credit score at risk so it’s best to avoid making unnecessary purchases using your card.
Age of Credit
Your credit history affects your score by 15%. Companies consider how long you’ve been handling your account. So the older credit age, the better as it shows how much of a responsible cardholder you are.
Types of Credit
10% of your credit score is from the types of your credit accounts. The two basic types, revolving accounts and the installment loans, can both improve your score because it shows how well you can manage such finances.
Inquiries are the other 10% of your credit score. Every card or loan application made requires a credit check and the data gathered from this credit check are saved to your credit file.
In case consecutive inquiries show an inconsistency in your payments, such will affect your credit score negatively.
Take note of all these factors and check your credit history now. Improve and update all your credit files to attain that loan or card you’ve always wanted to have!