5 Factors Affecting Your Credit Score
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The words “credit score” may be the most adult words in the English language. It is three digits that give a lender a sense of whether you will repay your loans. The higher your credit score, the more likely you will be a responsible borrower. Good credit helps you negotiate better credit terms like lower payments and interest rates.
As your finances change, your credit score will change too. Below is a general guide to help understand whether you have a good credit rating.
Lenders will pull a credit report to calculate your credit score by gathering five factors.
Paying your bills on time will keep your credit score looking good. Late payments, frequent late payments, and very late payments will decrease your score. Previous legal actions such as bankruptcy claims, garnished wages, or foreclosures are red flags for lenders. The timeline of adverse events does matter. The further they are in the past, the more forgiving a lender might be.
You don’t want to overstretch your finances. Your current debt load is used to calculate your credit utilization ratio. This helps a lender understand how much more borrowing you can responsibly handle before reaching a breaking point.
Years of responsible borrowing keep your credit score high. Start with small credit transactions, such as a credit card if you are young. This helps build your credit history if you pay on time and in full each statement. Having a credit card you never use helps create a historical profile for lenders.
Less is more. Too many credit accounts give the impression that you frequently experience cash flow problems. Lenders may see you as a risky client. Try to keep your credit applications fewer and far between to keep your credit score up.
Lenders like to see loan applications from people who can responsibly manage various credit types. Holding a mortgage, credit cards, and a line of credit without any late payments or defaults indicates someone is on top of their finances.
Installment loans can help you build a good credit history by providing a manageable payment schedule. Contact the team at NiceLoans! to discuss the installment loan process.
As your finances change, your credit score will change too. Below is a general guide to help understand whether you have a good credit rating.
- 300-579: Poor
- 580-669: Fair
- 670-739: Good
- 740-799: Very good
- 800-850: Excellent
Lenders will pull a credit report to calculate your credit score by gathering five factors.
Payment History
Paying your bills on time will keep your credit score looking good. Late payments, frequent late payments, and very late payments will decrease your score. Previous legal actions such as bankruptcy claims, garnished wages, or foreclosures are red flags for lenders. The timeline of adverse events does matter. The further they are in the past, the more forgiving a lender might be.
Amount Owed
You don’t want to overstretch your finances. Your current debt load is used to calculate your credit utilization ratio. This helps a lender understand how much more borrowing you can responsibly handle before reaching a breaking point.
Length of Your Credit History
Years of responsible borrowing keep your credit score high. Start with small credit transactions, such as a credit card if you are young. This helps build your credit history if you pay on time and in full each statement. Having a credit card you never use helps create a historical profile for lenders.
Number of Requested Credit Accounts
Less is more. Too many credit accounts give the impression that you frequently experience cash flow problems. Lenders may see you as a risky client. Try to keep your credit applications fewer and far between to keep your credit score up.
Types of Credit
Lenders like to see loan applications from people who can responsibly manage various credit types. Holding a mortgage, credit cards, and a line of credit without any late payments or defaults indicates someone is on top of their finances.Installment loans can help you build a good credit history by providing a manageable payment schedule. Contact the team at NiceLoans! to discuss the installment loan process.