What Makes Up Your Credit Score

by Annabelle B. content manager

A credit score is not just a three-digit number. It helps lenders learn about the risk of loaning money to a certain person. That number will be also a "must-have" for the credit card companies and mortgage bankers. Why? It shows the financial responsibility that approves that it is safe to supply you with funding. 

 

That is why it is so important to know how to make your credit score. If you have any problems with it, you may not get any approval. There is no difference whether you turn to a bank or want to borrow money through the Internet. This information can be checked all over the world, whether you plan to apply for online payday loans in Canada, the USA, the UK, etc. A good or at least a fair credit score is needed.

 

There are five main things that make a credit score. Those are:

 

1. Payment history

 

It is important for lenders to know that they will get back their money. That is why they learn whether all your bills were paid on time. If you've paid late, there might be a negative effect on your score. But a person who missed several payments this year will have more problems. And a person that had the same problem five years ago may not have problems at all. 

 

Lenders may not work with you if there are debt collections. This will definitely make them think that you may not return the money you want to borrow. The best way to improve your credit score in this situation is to pay all the bills in time. 

 

2. Utilization of credit

 

This is the level of debt that shows how much of the available credit you have used. Lenders will be also interested in your specific types of accounts. It is much better if you have different types of credit. But it is important to manage them all in a responsible manner. 

 

If a person borrows money, he should maintain low credit card balances. To have the best credit score, it is important to have a low credit utilization ratio. It should be less than 6%. 

 

3. Length of credit history

 

Lenders also take into account the period of time of using credit. The length of credit history may be long or short. But in both cases, it is important that all the payments were made on time. 

 

You may even don’t use your credit account anymore, but leave it open. This will help boost the score too. Those who don’t have a credit history may improve their scores if they get a credit.

 

4. New credit

 

It is better not to open too many credit cards at the same period of time. It may look like you are in a financial trouble. A person may apply for a new credit account only if in need. It will help lower the average account age. But at the same time, this will have a great impact on your scores.

 

Lenders will check the new lines of credit only for the past year. That is why it is better not to apply for a lot of new lines of credit within 12 months.

 

5. Credit mix

 

It is great if you have had credit cards, mortgages or store accounts. This mix shows that you can handle all sorts of credit.  But it is not a good idea to open another account just to increase the credit score. 

 

Every person can make a good credit score. The rules are simple: be more attentive, plan the budget and pay the bills on time.  

Sponsor Ads

• Ad Space Available - Rent it Now!

Created on Mar 8th 2018 13:38. Viewed 951 times.

Comments