One of the most important data that you must monitor is your credit score. This is because it actually affects your financial status in a very important way. This is true especially when you are a type of consumer where you prefer spending using your credit card rather that spending using cash. In any case, it is really important that you must be able to maintain a high score in able for you to have a hassle-free financial situation.
Take note of the fact that once you realize a high credit score, it significantly makes your future financial transactions more secure. This is because having such high scores would make you a low-risk debtor to creditors. In this case, they will not hesitate to give you the loan that you are going to secure, because your credit score shows that you are more likely to pay it than not.
However, when you have a low credit score, creditors will generally view you as a high risk debtor. This will make it more difficult for you to secure loans. In this case, most likely, you have no option but to secure loans from sub prime markets. And remember that the sub prime market has one of the highest interest rate payments in the financial market.
In this case, it is necessary for you to know what the parameters that comprises your credit scores. It may be true that credit bureaus still keep confidential the way they score your credit. However, knowing the parameters may still help you improve your credit score. Here are some of them:
New credit accounts: 10%
In this parameter, the number of your new credit accounts would directly affect your credit score. The more credit accounts that you have, the lower the score that you get. This is because of the fact that having many credit accounts actually makes you have a larger propensity to pile up your debt.
The kind of debt that you have: 10%
Surely, this data would also affect the credit score that you may receive. The kind of debt that you have actually tells the specific condition of your debt; on whether it has high interest rates, or whether it has been accumulated into a large amount, and the like. Of course, having bad information would lead to bad scores.
Your credit history: 15%
In this case, the longer the credit history that you have, the higher the credit score that you may get. This is because of the fact that having a long credit history makes you a better financial manager to credit bureaus.
Your credit to debt ratio: 30%
Your credit to debt ratio basically means the proportion of your credit limit that has incurred debt. In this case, the higher the credit to debt ratio, the lower the credits score. This is because having a high credit to debt ratio makes you more vulnerable to overspending and accumulating debt.
Your payment history: 35%
The reason why it has the largest percentage because it actually shows whether you are paying your debt, as well as how do you actually pay for it. Of course, delinquent payers and default payers would surely make you have incredibly low credit scores as a reward.
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