Your Credit score greatly affects your life now and in the future in an unexpected way. Your credit score determines the interest rate payable for credit card and loan and helps lenders decide if you can be approved for a credit card or loan.
Companies like insurance company now use your credit score to make decisions about you. Also, utility companies check your credit before creating new service in your name and your credit history is been checked by some employer to enable them to determine if you can be given a job, a raise, or promotion.
Building and safe guiding your credit score is essential, and also how you manage the following matters a lot.
Bill Payment History.
Surprisingly, 35% of your credit score is determined by your payment history. How often you pay your bills have an effect on your credit score more than anything. With payment issues such as; charge-offs, bankruptcy, collections, repossession, tax lien or foreclosure, can ruin your credit score, that is making it hard for you to be approved for that, it has to do with good credit.
What to do for your credit score is making your payments monthly and on time.
The Level of Your Debt Matters | Factors That Affect Your Credit Score
Your debt level on the order hand determines 30% of your credit score. Credit scoring calculators, such as the FICO score, see some key factors in line with your debt. The ratio of your credit card balance to your credit limit( or credit utilization), the relation of your loan balance to the original loan amount, and all the amount of debt you carry.
You are to keep your credit card utilization at 30% or less. That do not charge more than 30% of any card’s available limit.
Too much debt or huge balance may affect your credit score greatly. But your credit score gets better quickly as you pay your balances.
Age of Your Credit History
The age of your credit is 15% of your credit score, considering both the age of your oldest and mean age of all your account. Being in possession of an “older” credit age is good for your credit score due to the fact that it shows you have much experience managing credit.
Opening or closing an existing account can reduce your mean or average credit age. So do not open many new accounts at once.
The Credit Types on Your Report.
There are two types of credit accounts: installation loan and revolving account. If you have both types of accounts on your credit report, it is good, especially for your credit report score. As it indicates that you can successfully manage different types of credit.
You can have a loan from different types of assets, like a home or a car, added to your credit card and even a personal loan or Student Loan. Because 10% of your credit score is based on the types of credit, so make sure you have the necessary types of credit accounts to improve your score.
The Number Of Credit Inquiries Made
Whenever you send an application that needs a credit check, an inquiry which is 10% of your credit score is added to your credit report. A lot of inquiry, especially in a short time can reduce the points of your FICO score, but one or two will not. Therefore, you are advised to keep your application at minimum to save your credit score.
Luckily, only the inquiries made in the last 12 months factors into your credit score, but this may vanish from your credit report after 24 months.
Also, to check your credit report results in a “soft” inquiry, does not affect your credit score.