Factors that affect your credit score

Five primary factors affect the credit score that determines your acceptance or rejection for all loans or credit cards, and strongly alters interest rates or the entire cost for you to borrow funds.

In every application you complete, keep in mind that credit scores play a major role in permitting the person to borrow or not. Here are fundamental factors regarding credit scores:

Your payment history carries about 35 percent of your credit score; this will change depending on the scoring agency. Apparently this is the biggest factor since an individual with a history as a good payer is seen as a safe person to lend money to. Lending companies can somehow be guaranteed if you are known for paying your bills on time.

If ever you have negative tracks on your credit score, there are certain determinations that impact lowering your score. The first one is the time since the event happened. If it occurred a long time ago and now you are regularly paying your bills on time, then that will not affect your score very much. If, however, that incident occurred just few weeks ago, then expect a big effect on your score.

Another point is the number of missed payments, which can affect your credit. One missed payment in ten years of good credit record will not matter that much. However, if more missed payments are present in your record, you will probably risk getting a lowered credit score. The last point has to do with how late you were in paying your bills on one of your credit cards.

Alternatively, the amount of your recent credit is another factor, which accounts for a particular percentage of your credit score. This covers your credit cards, car loans, home mortgage loans and other financial liabilities. Lending companies will know how you handle your credit limit and if you are abusing it or not. To make a good impact on your score, you simply have to pay your loans to minimize the percentage of your balance.

How long you have had credit is a factor that can account for almost 15 percent of your credit score. This is because over time it is a lot easier to establish patterns of behavior.
Even though you are a good payer, but you only have a credit card for a short period of time and never had long-term credits, lending institutions will still be uncertain about your financial capabilities. This is due to the fact that you have not yet encountered critical incidents of major financial responsibility.

The last application for credit is also a factor on your credit score. Your current credit application can give the impression that you badly need money, and lack of money can have a negative impact on your score. There are instances where lenders inspect your credit score, which can have a negative effect on your application. Hence, it is wise not to permit lenders to see your credit score unless you are seriously looking for a loan.

The last percentage of the credit score deals with the types of credit you are using. There are two types of credit, revolving and installment. Credit cards and other related items are examples of revolving credit. Installment type credit includes auto loans and mortgages. Generally, people who have various credit sources get a higher score.

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