What Affects Your Credit Score?
Credit scores usually range from 300 to 900. Similar to a test score, points are added towards positive things and you get negative points for undesirable actions. As a borrower, you should aim for a higher credit score to be more attractive to lenders. This will give you an opportunity to obtain the best deals in the market. And then you will be able get loans of larger amounts and you will be charged lower interest rates.
Your credit score is typically composed of 5 criteria. They are your payment history, the amounts you owe, the length of your credit history, the types of credits you have and a factor on new credits.
What would make your look good in the eyes of creditors is if you pay your bills and your credit on time always. What would even be better if you pay them in full. Of course, you would have to have a steady source of income so that you will be capable of paying your loans. This is very important because even if you have a good credit score creditors will hesitate to lend you credit if you currently don’t have a job. Creditors would also see it a good sign if you don’t typically max out your credit lines. Ideally you should only use 25% or less of the credit available to you.
Conversely, you should avoid having late or missed payments. You should also avoid using up to 80% of your credit line. This will give you less room to pay for additional loans so this will make you a less attractive borrower. Applying for many loans from creditors is also not good especially if you do it longer time period. This will pose a negative effect on your credit score. And most of all, avoid bankruptcy at all costs because this will be reflected on your credit report for up to 10 years. With this on your credit report, most borrowers would surely prefer giving the loans to others who have better ratings and haven’t gone bankrupt.
The length of your credit history is also a very important factor. The longer credit history you have the better. The longer credit record you have the more accurate it is about your paying ability and credit worthiness track record. The longer you’ve been showing a good record the better chances there are that you truly a person who pays credit. This plus a good and stable job gives creditors a good reason to grant you loans.
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