There are five primary factors that affect the scary credit score which determines your acceptance or rejection for all loans or credit cards, and strongly changes the interest rates or the entire cost for you to borrow the funds.
As you go through this article you will read the basic overview of the most important factors identifying your credit or loan score. In every application you do, keep in mind that credit scores has a major role in permitting the person to borrow or not. Here are fundamental factors and an estimate in the credit score.
Your payment history carries about 35% of your credit score: this will change depending on the scoring agency. Apparently, this is the biggest factor since an individual with a history of a good payer is a safe person to lend money to. Lending companies can somehow be guaranteed if you are known for paying your dues on time.
If ever you have negative tracks on your credit score, there are points that will determine the amount of deduction to your credit score, and the first one is the time since the event happened. If it occurred a long time ago and after that you are regularly paying your dues on time, then that will not affect your score very much. But if that incident occurred just few weeks ago, then expect for a big effect on your score.
Another point is the number of missed payments which can incredibly affect your assessment. One missed payment in ten years of good credit record will not matter that much. However, if more missed payments present in your record, you will surely have higher risk of getting a lower loan score. And the last point will be on how bad was the mistake of being late in paying your dues on one of your credit card.
Alternatively, the amount of your recent credit is another factor which bares a particular percentage of your credit score. This covers your credit cards, car loans, home mortgage loans and other financial liabilities. Lending companies will know how you handle your credit limit if you are abusing it or not. To give you a good impact on your score, you simply have to pay your loans to minimize the percentage of your balance.
The time on how long you have had credit is a factor that can have almost 15% of your credit score. This is because time is a lot easier to establish patters of behavior.
Even though you are a good player but you only have a credit card for a short period of time and never had long-term credits, lending institutions will still have uncertain thoughts on your financial capabilities. This is due to the fact that you have not encountered any of the critical incidents of having major financial responsibility.
The last application for credit is also a factor on your credit score. Your current credit application can put an impression that you badly need of money. And lack of money can give a negative impact on your score. There are instances where lenders inspect your credit score which can give you a negative effect on it. Hence, it is wise not to permit lenders of banks to take a peek on your credit score unless you are seriously looking for a loan.
The last percentage of the credit score goes to the types of credit you are using. There are two types of credit, revolving and installment. Credit cards and other related items are examples of revolving credit. As for the installment type, auto loans and mortgages are some of its examples. Generally, people who have various credit sources get a higher score.
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