What Is A Credit Score?
Your credit score will determine whether or not you'll be
approved for a mortgage loan, and how high your interest rate
will be. Your credit score will also determine the cost of
your car insurance. Even certain jobs, which you apply for,
will require you to have good credit. Having a low score will
make things much more expensive, and you may find that some
companies won't hire you. The easiest way to get a good score
is to make sure you're responsible with making your payments
on time. It is also important to understand what is used to
calculate the score.
Calculating Your Total
The type of different loans you have makes up about 10% of
the score. If you don't have an established credit history,
the number of different accounts you have will be considered.
Your payment history makes up 35% of your credit score. The
number of different accounts you make payments on is considered,
as well as number of late or missed payments you have. Any
liens, bankruptcies, or judgments will be reviewed, and this
information will be used to factor in your score. Services
such as furniture rentals and car loans are included as well
as credit cards.
The total amount owed makes up about 30% of your credit score.
The number of accounts you have and the amounts you owe on
all of them are reviewed. The closer you are to maximizing
out your loans, the more likely it is that your credit score
will be lower. How much you have paid back on your loans is
also taken into consideration. The age of your credit history
makes up about 15% of your credit score. If you have a long
credit history your score will be higher if you don't have
any negative marks in the past. The last factor that makes
up your credit score is called new credit.
New Agreements
New credit refers to the number of new loans you have opened
recently, and makes up about 10% of your credit score. The
number of request you've made for credit cards or loans is
also computed. Now that you know all of the things that are
used to calculate your score, what can you do to improve it?
What You Can Do To Improve Credit Score?
One of the things you can do is make sure all of your bills
are paid on time. If you are too busy to make sure your bills
are paid on time, set up automatic payments so that the money
is debited from your account on the day it is due. You also
want to make sure you don't open too many accounts within
a short period of time. It is also important to keep your
balance low in proportion to the total amount of credit available
on the loan. You should owe 25% less than the total available
credit on your loan or credit card.
It is also better to pay off your credit card instead of
moving over the balance to a card that has a lower interest
rate. Constantly moving around your balances can cause your
score to become lower, because the total amount you owe could
fluctuate if you close certain accounts.
Increase Your Credit Score!
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