1. Your Credit Score: What Factors Contribute to It?
Do you have a mortgage or a loan? Those companies have checked your three digit number or credit
score, which is a foundation to lending you money or not. This score portrays your behavior, which a
creditor understands before considering you as a reliable borrower.
What contributes to your credit score?
A credit report signifies the credit worthiness of an individual; it incorporates certain details which are
used in the calculation of the credit score. A regular credit check is desired so that one can manage his or
her own report well. Also understanding about credit scores will make you more aware of the direction
one should take.
Know the major factors that contribute to your credit score being good, average or bad:
Make sure you pay bills or fines on time to the creditors who submit information to the agencies
because 35 percent of your credit score is determined through payment history. Even unpaid
library fines, medical bills or parking tickets may lower the score.
Amounts owed by you, the creditor, integrate up to 30 percent. This is also compared with the
total available to you or the amount of the loan borrowed by you. Your credit score may suffer if
you exceed your credit limit.
Your few and old accounts with timely payments can contribute in a healthy way. 15 percent of
the score depends on the length of your credit history. Also your duration as well as the last
activity on your account is noticed while calculating the scores. It is suggested that you not close
your old accounts (along with timely payments) for a healthy contribution towards your credit
report.
Your recently opened accounts compared to the total number of your opened accounts contribute
to 10 percent of your score. In addition, your credit report also displays the number of recent
inquiries which also forms the basis for calculating scores. A decline in score is noticed when an
individual looks for new sources for credit. This sends out messages in the mind of creditors that
you are in some kind of financial turmoil. So be selective when you have to opt for an auto loan or
mortgage because with every inquiry creditors can degrade their scores.
The rest is contributed by the type of credit used. 10 percent of the score is calculated after
looking at individuals’ borrowed credit. For instance, with debt for which you have fixed
installments every month it signifies that you have to take out a big amount routinely; mortgages
can be cited in this case. And with this it can be estimated how individuals will carry other debts
like credit cards.
This information can help you become more informed about the management of credit scores. Through
regular credit checks, you can get a grip on your declining financial conditions.