Useful Info About The Factors That Affect The Credit Score
Today every person realizes the importance of accredit score. It is a crucial factor in getting approved credits whether it is a car loan, mortgage or credit card. Traditionally, loan stands for the risk that lenders will undertake in the case they lend a certain amount of money. Also it determines the amount of loan they can borrow. However, there are some factors that affect a credit score. How it is possible to understand that your credit history looks good? In this article I am going to offer you some important factors that affect your credit score.
- The most important factor in counting your score is the history of your payment. Traditionally, it is the record of payments made to lenders. Delayed payments, late payments and missed payments are all the part of your credit history. Usually, this comprises only 35 per cent of your credit score which means that a bad payment history is the worst that could ever happen to your credit rating. Most marks in your payment history remains on your credit history report for seven years whether the debt has been settled or paid.
- The next factor is the credit use ratio. It is a comparison of the amount of credit available to the amount that you have actually used. You will have a higher score in the case you have more unused credit. It is quite unreliable metric because it takes into account only your open accounts. It is nice to have some opened accounts and keeping them paid off. The usage ration is traditionally weight about 30 per cent of your total score.
- The next factor is the length of your credit history. It takes about 15 per cent of your credit score. It provides the lender with the well defined view of your debt paying habits. The longer your credit history the more information lenders will have about your credibility. This is the only factor that the borrower cannot control. However it does not suggest that it will benefit you to start crating your credit as soon as possible. The lesser your credit history the less value it has for the lenders.
- The other factor is types of the loans that you had. In the case you have only one type of the loan, for example, credit card account, this part of your credit score will be lower. Presence of several different loans as bank loans, mortgage, credit card debt will increase the part of your credit score because it informs the lender that you have to manage various types of the loans. It is about 10 per cent of your credit score.
- Your current state is an important factor to lenders because it is the reason of your stability.
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