Factors Influencing Your Credit Score And Steps To Improve It

| May 9, 2014

Credit score is integral to opt for any financial services. It serves as a report card that measures the credit worthiness in the scale of three hundred to eight hundred fifty. This three digit score is of utmost importance to the banks, insurance companies, employers and other potential landlords. You can obtain the credit reports for free from three of the major credit bureaus of the country. However, it is important to remember that there is no perfect credit score that is accepted all over as the criteria of a good score might vary depending on the lenders that you are dealing with. Rejection of a loan appeal by one lender does not necessarily mean that the same will be rejected by the other lenders.

Effect of credit scores

The credit scores have a direct effect on the rate of interest that levied on the loan. Low scores might lead to rejection of your applications pertaining to loans and other financial services. If you want to build your credit scores first you need to understand the factors that affect the scores. Payment history plays an important role in determining the credit score as timely payments provide leverage to the score. Maximum emphasis is given on the payment history while formulating your credit score. The amount that you owe to various lenders is also important as the credit bureaus consider the debt and also the credit to debt ratio.

Importance of established credit history

Established credit histories show your credibility than the applicants who have just started their credit accounts. Often the lenders prefer the applicants who have a long credit history than the new ones. The credits that you have utilized in the past are reflected in the credit history and it contributes to only ten percent of the total score. The lenders can have an insight of your finances through this. Lenders determine your financial stature through these scores and they prefer the applicants who are likely to repay the amount, to reduce their risk.

Repair your credit score

If you are wondering about the steps that will help you to improve your credit score, then the first important step is to know your credit history. In one financial year, you are entitled to get a free copy of the same from the credit bureaus. Repairing the credit score cannot be accomplished overnight, you need to adhere to simple steps that can help you to prove your credit worthiness.

Steps to improve the score

Since payment history is accounted the most for the credit history, make sure that you make timely payment of your mortgages, loans and credit card bills. This is considered to be a thumb rule for improving or building a good credit score. If you are using a credit card regularly then keep the debt limit low, and refrain from spending the amount that is beyond your limit. Also avoid the cash advances to pay your debt as it affects the credit score. If you are planning to opt for lawsuit funding 2014, the lenders will not be seeking for the credit history.

Maintain a credit history

Refrain from opening too many new accounts all at a time, as it will lower the age of your account. You can also keep your account long as it increases the age of the account, provides the leverage to your credit worthiness. Also check your credit score regularly, so that you can take the necessary steps as and when required. You can also diversify the credits that you utilize or opt for payment through installment as it will help to improve the score. Often people tend to use the debit cards that are prepaid cards, but in reality it does not do any good to your credit score.

Author Bio: Helen Dickson is a financial advisor and in her blogs she has enlisted the ways through which you can improve the credit score. Unlike the other loans, approval of the lawsuit funding 2014 does not need assessment of the credit score.

Category: Credit

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