Can You Increase Our Credit Score?

Everyone knows that if you have a good credit score, the easier it is to borrow money or get financing. It may be difficult for many people to know how a credit score is compiled. Here we will try to describe the factors in how you your credit score is calculated.

Do you pay on time?

Payment history is considered by lenders as the most important variable. Your payment history makes up a full 35% of your score. This info will be placed within your credit report. Creditors will be able to see your payment history when they view your credit report. To keep your score higher, always pay your payments a few days early. Lenders will frown on late payers, and may report you even if you’re only late by a few days. This will definitely for sure reduce your credit rating considerably.

How Much Debt You Got?

This can make up 30% of your credit file and is known as your debt ratio. This is described by the debt you owe versus your credit limit. For example we could be in possession of a credit card with a credit limit of $500 and you owe $480 this is a very high debt ratio and could have a negative affect.

You should make an effort to reduce your credit card debt by 50% or lower, this will for sure give your credit score a huge boost. Just a tip - the credit bureaus do not distinguish whether you pay off your credit cards every month or just carry a balance so keep it under 50% of your credit line.

Have You Had Credit For Long?

The more time you have had credit, the better. A long good credit history is almost always needed to be accepted for financing. This is the third most important factor within your credit report.

Many people make the mistake of closing accounts that they no longer use. Credit card accounts you have had for some considerable years, it’s a good idea to, leave the account open. This will guarantee to keep your credit history going and obviously increase your credit rating.

What Type of Debt do you have?

Whatever type your debt is, this will be responsible for 10% of your total credit score. There are different types of debts creditors will look for, they are loans, revolving credit & credit cards. The reason creditors score the difference is because loans and consumer financing have fixed monthly repayment plans.

If your revolving credit makes up most of your credit report, that is not very good. This is because lenders know that the monthly minimums will vary every month depending on how much you chose to spend.

Applied Recently For A Credit Card?

To keep your score high, the less times you apply for credit the better. This is responsible for 10% of your credit report. Beware that every time you apply for credit, this will be held on your credit file for 2 years. It is advisable to limit applying for credit cards & loans, over an over agin.

People shopping around looking for a big purchase like a car, can fall into this trap. You will probably allow a car dealership to run a credit check and run a credit report at each one to see what type of financing you can get, this will greatly lower you credit score as each credit report is run. It’s advisable not to let any lenders to run a credit report, until you’re ready to purchase.

This is how your credit score is figured. We hope, these tips will help you increase your credit score considerably. Your credit score total can be between 300 and 850. Obviously the higher the better for your credit rating.

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