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It is considered that an excellent credit score, the simpler it will be to gain loans, credit cards & mortgages. But most people have no idea what actually makes u your score. There are actually five separate things that make up your score. Are You A Late Payer? This is what has the most inpact on your score. Payment history will make up 35% of your final credit rating. This will be placed on your credit rating file. When people pull your credit report they will see exactly how you pay your monthly bills. For a high score it is recommended to pay your monthly payments early. Some creditors will report you as a slow payer even if you are only a few days behind. This will definitely for sure reduce your credit rating considerably. How Much Do You Owe? This can make up 30% of your credit file and is known as your debt ratio. This is described by the debt you owe versus your credit limit. For example we could be in possession of a credit card with a spending limit of $500 and you owe $480 this is considered a very high debt ratio and could have a negative affect. Definitely if one can reduce their Credit cards debt to less than 50%, this will positively influence your credit score. Credit bureaus will not differentiate between payers who pay their whole balance or payers who keep their balance below the 50% mark. Have You Had Credit For Long? The more time you have had credit, the better. Creditors are more likely to accept applications from borrowers who have a long good credit history. This part makes up 15% of your total. For a high credit rating don’t close paid off accounts. If you have a credit card that you have had for over five years, leave the account open. This for sure will increase your credit history and in turn increase your credit rating. Do you know the type of debt you have? Whatever type your debt is, this will be responsible for 10% of your total credit score. The types of debt creditors will look for are as follows: loans, revolving credit & Credit cards. The reason creditors score the difference is because bank loans and consumer financing have set monthly payments. If your revolving credit makes up most of your credit report, that is not very good. This is because lenders know that the monthly minimums will vary every month depending on how much you chose to spend. Applied Recently For A Credit Card? The high credit scorers have one thing in common, they apply for credit only a few times. This is responsible for 10% of your credit report. The amount of times you have asked for credit will stay on your report for two years. To gain a high credit score, limit applying for credit over this period. Consumers who are looking to purchase a car are good examples who can get into trouble in this area. When looking to buy a car you will probably allow a few card dealers creditors to run a credit check report at each one to see if you credit worthy, beware that each credit report request will reduce your credit ranking. Don't let any creditors run a credit report until your ready to purchase. This is how your credit score is figured. We hope, these tips will help you increase your credit score considerably. Your credit score total can be between 300 and 850. Obviously the higher the better for your credit rating. |