Many consumers have no notion what a credit score is comprised of. What are they measuring and how does this number correlate to my creditworthiness? While common sense tells us that paying our bills on time is an essential factor what else is central when it comes to credit scores?
A credit score is just a numerical measurement of certain statistics. It is supposed to tell the lenders about the risk factors of the borrowers. Higher scores are considered a lower risk while lesser scores are considered to be a higher risk. Scores above 700 are considered excellent credit risks and scores below 600 are considered to be bad risks.
Opposite to accepted belief, credit scores can adjust regularly. There are a range of factors that are involved in the scoring and these factors change frequently. You may have always been timely with your payments yet other factors can take down your credit score. Different types of credit are scored differently and having too many inquiries on your report can also be disadvantageous.
The factors that have an effect on your credit score are as follows. 35% is your payment record. Keep in mind that only payments beyond 30 days late are considered damaging. 30% is based upon how much you owe compared to how much credit is available to you. This is referred to as the debt to credit ratio. 15% is the length of your credit history, the longer the better. 10% is the type of credit you employ. Credit cards, car loans and mortgages are considered positive while consumer finance debt is considered negative. 10% is the recent inquiries on your report. Next time you are at the department store and they offer you 20% off for opening a credit line, just say, “No”!
If you want to jack up your credit score, it is advantageous to be alert of these issues and use them to your gain. Make sure that your payments are all made on time and do not charge or use more than 35% or your open credit. Stay away from consumer finance companies and department store credit cards and do not let anybody inquire into your credit report unless you absolutely must.
You can boost your credit scores by taking action on these items. You also have the right to contest anything that is listed on your report. There are ways to repair your credit and there are even some professionals that can facilitate you.
You do not have to struggle with low credit scores. Be educated and take action to repair your credit and jack up your scores.