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What are the Factors That May Affect Credit Score?

By Derek Brown
Published: Wednesday, January 12th, 2011

Credit score is the summary of your debts, loans, payments and even retail purchases. It defines a person’s credit worthiness. Making an impressive image to lenders can be very beneficial. Being able to keep a good number, ideally above 678, will secure you a lower interest rate loan. This means that creditors have the confidence that you will be able you make payments on time.

How does credit score work? It is generally a record of your credit history, which becomes the basis of your lender whether or not to grant you the loan you are applying for. If you do not have a credit history or have very little of it, it is possible that you do not have a credit score. Apply for a credit card or a checking account. Just make sure to have updates payments and deposits to create an impressive history.

35% of your credit score is based on your payment history, account payments on credit cards and department stores. If you want to have a good score, make sure to pay your dues on time. There is no other excuse for late payments other than negligence. Plus, the most recent financial activities weighs more than payments made a few years back, giving a big room for improvement of your score. The amount of your outstanding debt or amounts that you currently owe accounts for 30% of your score. It is the number of accounts and the amount of outstanding balances you have in your account.

Your credit limits and how much of it is being used. If you use up most of your credit limit, this means that you are in a cycle of debts and may not be able to be granted more loans. 15 % of your total credit score accounts for the length of your credits, this means that from the time that your account has been opened, it is being monitored for the balances you leave in it. The higher the balance, the greater chance you have in obtaining a higher score. 10% of which is your new credits or credit inquiries, applications for credit cards and loans may lower your score. This happens when a lending company checks your score because of an application. When you check your own credit score, it does not affect your rating. The types of credit take up the remaining 10% of your score, when you make a lot of credit card debts, this may mean that you are in a financial blunder.

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