How Is Our Credit Score?

Everyone knows that if you have a good credit score, the easier it is to borrow money or get financing. A lot of credit seekers do not know how a credit score is calculated. There are many deciding factors in calculating your credit score, we hope you find this article helpful.

Do you pay on time? Consider this section to be the most important for your credit score. Your payment history makes up a full 35% of your score. This information is on your credit report. Beware that lenders will have access to your payment history whenever you apply for finance. 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 spending limit of $500 and you owe $480 this is a very large debt ratio and could have a negative affect.

Definitely if one can reduce their credit card debt to less than 50%, 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.

Been Using Credit For Years? The longer your credit has been in good standing, the better. A long good credit history is almost always needed to be accepted for financing. This part makes up 15% of your total.

For a high credit rating don’t close paid off accounts. If you have a credit card that you have had for over five years, leave the account open. You don't have to use it, but this will extend the length of your credit history and that will help get your score up.

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 lenders score the difference is because loans and credit cards have set monthly payments.

If your revolving credit makes up most of your credit report, this will look bad on your report. Creditors know that monthly minimum payments will change every month, dependant on how much you decide you want to spend.

Applied Recently For A Credit Card? To keep your score high, the less times you apply for credit the better. This is responsible for 10% of your credit report. The amount of times you have asked for credit will stay on your report for two years. It is advisable to limit applying for credit cards & loans, over an over aging.

People shopping around looking for a big purchase like a car, can fall into this trap. If you have gone to a few different car dealers while shopping for a vehicle and let them run a credit check report at each one to see if you’re credit worthy, you have now greatly reduced you score. Don’t let any creditors run a credit report until your ready to purchase.

This is how your credit score is figured. Take on board these tips and your credit score will increase for sure. Your credit score total can be between 300 and 850. Obviously the higher the better for your credit rating.

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