Many consumers have no thought what a credit score is comprised of. What are they measuring and how does this number relate to my creditworthiness? While common sense tells us that paying our bills on time is an essential factor what else is key when it comes to credit scores?
A credit score is a numerical rating that takes into consideration certain statistics and compiles that information into a number that represents a consumer‘s creditworthiness. The higher the score the better credit risk the consumer is deemed to be. Scores above 700 are thought to be brilliant while scores below 600 are inadequate.
Credit scores are based upon a array of factors and these factors can vary regularly. You may have a low credit score yet have never been late on a payment. Other factors can have an effect on your score and bring it down. Different types of credit are looked upon more confidently than others and if you have too many credit inquiries on your account that will also influence you negatively.
Here are the factors that will affect your credit score. 35% is based upon your timely payment history. Only payments past 30 days late are counted as negative. 30% is your debt to credit ratio or the amount of money owing you have accrued compared to the amount of credit you have available. 15% is the length of your credit history. Of course, the longer your account the more constructive it is. 10% is the type of credit used. Consumer finance debt is considered to be harmful while credit card debt, car loans, and mortgages are more of a positive. 10% is how many current inquiries are on your report. Having too many inquiries is considered harmful.
Having some information about these factors and how they influence your score is a nice first step when it comes to repairing your credit and raising your credit scores. Use the information to your advantage. Keep your debt to credit ratio not more than 35%, make your payments on time every time and stay away from consumer finance credit and department store credit. And do not let anyone verify your credit for any reason unless you are no question getting credit. Do not let anyone check your credit on a whim.
By being aware of and taking action on these items you can start to advance your credit scores. If you have negative or erroneous marks on your report you have the right to challenge them. You can repair your credit yourself or you can let a professional to help you out.
Don’t fight with low credit scores any longer. Get educated and take action to raise your scores and repair your credit.