Many consumers have no clue what a credit score is comprised of. What are they measuring and how does this number correlate to my creditworthiness? While common sense tells us that paying our bills with time to spare is an important factor what else is vital when it comes to credit scores?
A credit score is just a mathematical measurement of certain statistics. It is intended to tell the lenders about the risk factors of the borrowers. Upper scores are considered a lower risk while poorer scores are considered to be a higher risk. Scores above 700 are considered exceptional credit risks and scores below 600 are considered to be bad risks.
Different to general belief, credit scores can adjust regularly. There are a assortment of factors that are involved in the scoring and these factors adjust often. You may have always been on time with your payments yet other factors can bring down your credit score. Different types of credit are scored differently and having too many inquiries on your report can also be detrimental.
The factors that have an effect on your credit score are as follows. 35% is your payment record. Keep in mind that only payments past 30 days late are considered negative. 30% is based upon how much you owe compared to how much credit is available to you. This is referred to as the debt to credit ratio. 15% is the time-span of your credit history, the longer the better. 10% is the type of credit you utilize. Credit cards, car loans and mortgages are considered helpful while consumer finance debt is considered negative. 10% is the current inquiries on your report. Next time you are at the department store and they offer you 20% off for opening a credit line, just say, “No”!
If you want to increase your credit score, it is effective to be attentive of these issues and use them to your gain. Make sure that your payments are all made on time and do not charge or use more than 35% or your existing credit. Stay away from consumer finance companies and department store credit cards and do not let anyone inquire into your credit report unless you absolutely must.
You can augment your credit scores and repair your credit. There are professionals that focus in credit repair or you can do it yourself but be aware that you have the right to challenge negative credit and negative credit scores.
You do not have to struggle with low credit scores. Be educated and take action to repair your credit and upgrade your scores.