How's Our Credit Score Percentage?
You should know that the better your credit score is, the simpler it will be to gain loans, credit cards & mortgages. It may be difficult for many people to know how a credit score is compiled. Here we will try to describe the factors in how you your credit score is calculated.
Are You A Late Payer?
Payment history is considered by lenders as the most important variable. Your payment history makes up a full 35% of your score. This info will be placed within your credit report. Creditors will be able to see your payment history when they view your credit report. 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 Do You Owe?
This can make up 30% of your credit file and is known as your debt ratio. This is described by the debt you owe versus your credit limit. For example we could be in possession of a credit card with a credit limit of $500 and you owe $480 this is a very high debt ratio and could have a negative affect.
If you can pay down your credit card debts to less than half the credit limit, 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.
Have You Had Credit For Long?
The more time you have had credit, the better. Creditors are more likely to accept applications from borrowers who have a long good credit history. This part makes up 15% of your total.
Don't make the mistake of closing the account where you have paid the debt off. Credit card accounts you have had for some considerable years, it's a good idea to, keep the account alive. This will guarantee to keep your credit history going and obviously 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 types of debt creditors will look for are as follows: loans, revolving credit & credit cards. 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 not help you. This is because lenders know that the monthly minimums will vary every month depending on how much you chose to spend.
Recently Been Turned Down For Credit?
The high credit scorers have one thing in common, they apply for credit only a few times. This part makes up the last 10% of your credit score. Beware that every time you apply for credit, this will be held on your credit file for 2 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 what type of financing you can get, this will greatly lower you credit score as each credit report is run. It's advisable not to let any lenders to run a credit report, until you're ready to purchase.
These are the main areas where your credit score is calculated. We hope, these tips will help you increase your credit score considerably. Your credit score total can be between 300 and 850. Obviously the higher the better for your credit rating.
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