Brief Ideas On What Affects Credit Scores

Having a good credit score is certainly something that you cannot overstate

. A good credit score is something that will allow you to secure good financing in your future and so if you want to borrow money in order to purchase a car, get a home, pay for education, or anything else it will be completely crucial that you develop and maintain a good credit score. But what exactly comes into your credit score? How exactly are credit scores affected?

Well, there are lots of different things that will come into your credit score and your credit rating. You will need to know about everyone of these in order to make sure that your rating is as good as it can be. Your credit score will be calculated through various things of varying degrees of importance. Your payment history will account for 35%, your current debts will be 30%, your credit history will be 15%, credit applications will be 10%, and the type of credit you have will be 10% as well.

Each of these factors will play a role in determining your credit score and as you can see the most important of these will be in your payment history. If you are someone who has managed to make all of your payments on time every single time then your credit score will be very good for this particular section. However, if you constantly miss payments then your credit score will be badly affected.

The current debt ratio that you have will also be another important factor. If you have a number of credit cards that are fairly close to their limits, at 90% or above for example, you will be seen to be having a much higher risk of defaulting.

When it comes to your credit history, a longer one that will increase your credit score in the main. This will also take into account the last time you used your credit and so if you have a number of cards with zero balance that have not been used for awhile, your score can actually go down.

If you are someone who also applies for credit cards on a regular basis this will have a negative impact on your credit score. You need to try to keep applications to a minimum and only make them if you require them.

The last thing that will be accounted for with your credit score will be the sort of credit you owe. Short-term credit that has high rates of interest such as credit cards will be seen as unfavourable. On the other hand, long-term loans such as mortgages and other types of loans will be more favourably looked upon.

by: Will Hollis

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