credit score

Oct 3 2018

Factors that Leave an Impact on the Borrowing Capacity

A few key factors tend to influence your borrowing capacity under all circumstances. It’s actually a single important factor that helps in determining whether you can own a home or not. Gaining a fair idea of how much you can borrow is of great help when you’re considering multiple properties simultaneously.

Once you gain a fair idea of your actually borrowing capacity, you’ll be able to adjust your property search accordingly. You may even achieve a few options that fall within your budget once you do your research. Many of you may simply be wondering about the factors that can prevent you from achieving the desired loan amount and the maximum amount that you can borrow.

Find out ways to enhance your chance of borrowing more:

Financial Commitments:

Prior to issuing a home loan, a lender has to determine the extent of mortgage repayment that you can afford. Apart from your income, the lender is bound to check out the commitments you have towards other outstanding debts.

A greater repayment capacity will enhance your power to borrow, more so, when you co-own a property with a relative. Your financial commitments may include vehicle financing, credit card repayment, repaying loans and other debts.

Loan Repayments:

The amount that you can borrow may be easily determined by the interest rate and the loan term that you sign up for. As the rate of interest falls, your repayment amount also gets lower. By opting for a short-term loan, you’ll end up saving much of the loan interest. You must accept a loan repayment term that matches your financial situation.

Living Costs:

Your loan application only gets approved when your lender does through your living costs. School fees and cost of child care are among charges that increase your living cost. Once the lender is able to identify your borrowing capacity, it becomes much easier for you to sort out these expenses. Even after maintaining a certain living standard, you’ll need to work towards repaying the mortgage.

Credit Rating:

Your credit rating is certainly an important factor that determines your borrowing capacity. By proving your worth as a reliable borrower, you’ll be able to convince the lender for a much higher loan amount. However, you’ll also need to repay the loan amount within the specified time-frame. Your loan application may be rejected after you’ve defaulted on repaying your utility bills and credit card bills in the recent past. Before even visiting a lender, you must check out free copies of your credit report for free from each of the 3 credit reporting agencies. All of the red flags appearing in your credit reports need to be compared and the discrepancies need to be resolved in any.



Asset Evaluation:

In an attempt to identify your actual loan requirement, a lender can run a credit check on the assets owned by you. All of the vehicles that you own as well as your investment options might affect a lender’s decision. These factors hold considerable ground in determining your loan requirement.

Keeping these factors in mind, you’ll need to work on all areas of opportunity just to enhance your borrowing capacity. This way, you’ll have more options of comparing loan and fresh job offers that come your way.

By Jonny • Credit, Credit Rating, Finance • 0 • Tags: , , , ,

Sep 14 2018

Simple Ways to Improve Your Credit Score

Simple Ways to Improve Your Credit Score

Have you applied for car finance recently but did not get approved because of bad credit? There are numerous factors that can affect your application for loans or a new line of credit, and among these factors, your credit standing plays a crucial role.

While you may have met all the other requirements but still can’t figure out why your loan application gets declined, it may be time to take a close look at your credit score.

When you have a less than stellar credit, it may seem like you’ve dug yourself into a deep, dark hole that you couldn’t get out of. However, you shouldn’t feel disheartened because there are simple ways you can do to improve your credit rating.

While the road to recovery is not easy, the good news is, it’s not impossible. But it will take plenty of effort and discipline on your part. So, to help you get started, here are several things you can do right now to get your credit standing back in good shape.

Check your credit report.

Remember when you were in school? If your parents wanted to know how your grades were doing, they would ask to see your report card. Improving your credit rating is basically the same thing. You can start by getting a copy of your credit history.

Just check online and look for sites, like creditsimple.com.au or creditsavvy.com.au, which offer this kind of service. It’s completely free, fast, and easy.

Look for possible errors.

If you think there are some mistakes on your credit report, you should carefully examine them and dispute these errors when necessary. The good news is that most credit bureaus and credit providers have set up a standard process to handle disputes for errors found on credit reports.

Pay your bills on time.

Staying on top of your finances can be overwhelming at times. But it’s very important that you track all your bills and pay them on time. Missing payments can put a dent on your credit standing and lower your credit score over time.

Usually, when you forget to pay a bill, after 30 days, a credit bureau will be notified, and this may affect your credit rating. So, to avoid this, you can set up arrangements like an automatic payment system from your bank to make sure you never fail to pay your bills on time.

Reduce your credit card balance.

One of the effective ways you can boost your credit standing is to pay down your credit card balances. If possible, keep your balances low, even those small balances as they may become a nuisance over time, especially if you have more than one credit card. This way, you can avoid saturating your credit report so many balances.

Use credit to your advantage.

While it may seem counter-intuitive to have outstanding credit, when you consistently pay them and avoid defaulting, this will have a positive impact on your credit score. When you show that you are not falling behind on your payments, it will show that you are a responsible borrower and can be trusted because you can pay your debts.



These are just some of the simple ways to get your credit standing in better shape. When you have reached a point where your credit rating is at a good spot, your chances of getting approved for loans will be higher than before.

Have you found other ways to improve your credit rating? If so, we’d love to hear from you. Please share your tips by leaving a comment, so that others may benefit.

 

By Jonny • Credit Score • 0 • Tags: ,

Jan 9 2018

Does your credit score affect your amorous pursuits?

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How many would ever attack their credit score to their online profiles that they create for dating? Not many but little do they know that their credit score might play an even bigger role in shaping romantic relations. When you talk of a credit score, you actually don’t just ascertain the amount of money the person has because it is more a way to know about a specific person’s attitude towards money and the responsibility he shares in this era of debt.

Previously, when people got married during their early 20s, they never spoke about their finances with each other. But times have changed now and when you meet someone who is in their early 20s and you invite them to a party, they arrive with almost a closet of financial stuff and this proves that money has always been important in the field of dating.

However, there are few studies which show how the mentality of people has changed about their finances. As per a recent survey done by Bankrate.com, it was seen that 2 among 5 adults are of the opinion that a person’s credit score would have an impact on the interest of a person who is dating the person. In fact, this figure includes 48% of the college graduates and 50% of the people with an annual income of $75,000 or even more than that.

As per a research by Federal Reserve, people with the best credit scores are most likely going to be engaged in committed relations and the more is the discrepancy between the credit scores of the couple, the more likely it will be for the relationship to end. This kind of result arrives because the initial scores show a constant credit usage which thereby leads to financial distress. So, as we see, people are giving more stress on credit scores before they are going on for a love relationship. There is greater importance on finances and scores.

According to a credit analyst of Bankrate, Mike Cetera, the results of the survey were definitely interesting but if more and more people get serious about knowing their credit scores and understanding them, people will gradually know how important it can be to take good care of your credit score in order to stay successful.

However, whenever you have a low credit score, there are many ways in which you can improve your score so that you are not seen as a risky lender when you approach a lending institution for a loan or an insurance policy. You might have been struggling with your medical bills and that could have spoilt your credit score. Whichever reason it may be, you should avoid hurting your romantic relation with your spouse.

Nevertheless, a better way in which you could determine the financial compatibility is by discussing on investing, saving, giving and sharing. As people are of the opinion that talking about your personal finances and your balance sheets are important, you should definitely give it a try to keep your love relationship going good.

By Jonny • Credit Score • 0 • Tags:

Sep 27 2016

Tricks for students to build good credit score – It’s time students become responsible

One of the most interesting parts of growing up is being able to taste financial freedom but learning how to use your finances can be challenging. It is a prerequisite among students to build a good credit as in future this helps you qualify for loans at a reasonable interest rate, auto insurance with reduced premiums, affordable rental applications, mobile phone plans and even a job at a good company! So, with all that said, how do you get started? The Credit CARD Act, which came into effect in 2010, changed all the rules of the credit card game. But to put it simply, it still comes down to showing a responsible behavior while dealing with your finances.

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Credit cards are more like necessary evil; you know you need it badly when you’re out for shopping but once you start misusing it, it backfires you in the form of outrageously high interest debt. So, if you don’t want to get tied down by the shackles of debt, here are some important ideas that you may take into consideration. Read on to know how you can build good credit.

? Be an authorized user on the account of your parents

Parents are always advised to add their student kids who are just off to college and who you don’t think are responsible enough, to their credit card accounts. The first card that a student should have is their parent’s card! The teenager should be an authorized user on the account of his parents so that they can supervise his spending activities. Moreover, this also helps students build good credit through piggybacking. In Piggybacking, a parent makes his child an authorized user of his card provided he himself has good credit. This will boost his kid’s credit score.

? Make sure you get the right credit card for you

Once a student is able to qualify for a regular credit card on his own, it’s vital for him to ensure that he takes the right credit card. He should do his homework by doing some research on finding out the credit card with the biggest benefits like lower rates, reasonable credit limits, no annual fees and clear cut billing policies. If you assess your finances and you think that you might carry a balance, opt for no-frills, low rate card. A cooler option would be a reward credit card.

? Don’t use your credit card for purchasing anything and everything

Timely payments and responsible usage of credit cards will always help you build a good credit history and also discourage the bank authorities from closing down your account due to inactivity. As soon as you get a credit card, you start a credit history and this show on your credit report. The responsible you are with your finances, the cleaner your credit report will be. But if you want to start credit, you have to continuously use the card. Think of regular expenses like groceries and other small expenses that you can put on your credit card.

? Pay off credit card balances every month

When you’re initially trying your level best to build good credit, you should try to carry no balance in your card. Make sure you pay off your balances every month and what if you can’t do that? That will clearly imply that you’re living beyond your means and that you have to curb your expenses in according to your income. A student should have a card only when he has a job or has some sort of financial support. Whenever your carry a balance, you owe interest rates and fees which thereafter leads to debt.
Being a student leaves you with improved financial responsibility. If you are eager to get yourself a credit card, make sure you follow the tips mentioned above to build good credit from the very beginning.

By Jonny • Credit, Credit Score • 1 • Tags:

Apr 7 2016

Track Your Credit Score Effortlessly So You Can You Can Borrow Money!

credit score

Too many people are unaware of their own Credit Score and misunderstand fully why we have them. Your credit score can have both vast rewards and exponential pitfalls, which effect an adult in almost every aspect of their lives. Taking an interest in what your Credit Score looks like and what effects it, will make it more likely that you can live the life you want and not just what others say you can!

Your own personal Credit Score, which you can get for free & well as tons of free information about improving your credit score, is produced by a system that calculates how reliable one is with their money and determiners how likely a person is to repay money to a Lender. The reliable likenesses is determines by many factors like your overall debt, types of, and how many, bank accounts you have, number of late payments and how old the current information is from when you are asking to barrow money from a lender. All significant financial history is recorded on a Credit Report and determines your overall Credit Score from 300-about 800. (The higher the number, the better the Credit Score.) Lenders can be individuals or companies that are allowing you to take out a line of credit in either cash or check form. This could be bank, a school, a private or commercial renter of apartments or/and houses. Which can result in all sorts of influences of your lifestyle?

credit-scoreOne in ten Americans are denied a job because of their Credit Score.  There is a source that can help people get cash even with bad credit, online payday loans no credit check, however this doesn’t work for all. Many people with poor credit are unable to get a car, cell phones, or cannot barrow the money required to buy or put a down payment on, a house! Even the amount of interest on the borrowed money that the lender demands you to pay back is a direct result of your credit score!  All of these factors, and so much more, can drastically effect the chances of being able to improve a credit score. Furthermore if you do not even know what your Credit Score is, how do you know if you need to improve it? If you have not looked at what is on your Credit Report you are under informed on how curtail everyday financial decisions are and which decision effect your future finances.

By using online sites and applications to track your Credit Report and Credit Score using free tools, like https://www.creditkarma.com/, https://www.creditsesame.com/free-credit-score/, and https://www.credit.com/free-credit-score/ not only will you know exactly what effects your score, you can also access your real time Credit Score! Not only do these sites track your credit score & give you free bureau reports, but they also offer top rated advice & additional tools to help you make your credit better.  Many advantages like these are accessible online,  and are reliable tools that need to be used to ensure healthy credit.  Learning about your credit, and the best ways to improve it is also imperative to keeping your credit healthy!  Useful alerts from these major credit report companies are able to notify you of any unauthorized information that has been recorded as an added defense to keeping your credit healthy!  With all these major tools at your disposal, not only tracking your credit, but keeping it health is much easier than ever before!

By Jonny • Credit Rating, Credit Score, Debt, Finance • 1 • Tags: , ,

Aug 25 2014

The Three Steps to Fixing Your Credit

There are a couple of things that you need to know about having less than perfect credit  The first is that there are more people out there whose credit profiles are not nearly as awesome as they’d like them to be—so there is no reason to feel embarrassed about your score or situation. The second is that credit scores change all the time. The credit you have now is not the credit you’ll have next month or next year. This means that you can fix your situation.

Step One: Finding Your Starting Place

The first thing that you need to do is get copies of your credit reports. You are entitled to at least one free credit report every year from each of the three major credit bureaus: Equifax, Experian and TransUnion.

It’s important to understand that accessing your credit reports does not necessarily mean learning your credit score.

Once you have your credit reports, you’ll want to make sure they are absolutely accurate. This means going over every detail and making sure that it is correct. If you see something that is even a little bit off, you need to dispute that detail with the reporting bureau. In addition to raising your credit score, it is important to get a clear and accurate idea of how much work you are going to need to do.

building-creditStep Two: Fixing Bad Credit

Most of the time, the key to fixing bad credit is getting back on track with your bills. Don’t worry about the payments you’ve missed in the past. You can’t do anything about those now. What matters is that you create a positive and steady payment plan for your future. It is also important that you work very hard to reduce your debt to income ratio. Your debt to income ratio is a big factor in your overall credit score. It is what lenders look at when you apply for loans or financing.

The best way to reduce your debt to income ratio is to increase the amount of money you send in to your creditors each month. By now you already know that you need to pay more than the minimum amount due if you ever want to get out of debt. Even $5 more toward that balance is a good thing. A better way to do it though, is to take your minimum amount due, add however much you are charged in interest every month and then tack at least $10 (though 10% is better).

If you have a lot of bills or if you’re worried that you won’t be able to afford to make even your monthly payments each month, don’t panic. Many creditors are willing to work with clients when it comes to things like interest rates and minimum amounts due. They’d rather reduce your interest rate than lose you as a customer. If this process intimidates you (or if you don’t have time to call and haggle with all of your creditors), a credit repair service can reduce the stress of the process. These companies negotiate with creditors on your behalf and help you set up budgets and payment plans that you can afford to keep.

Step Three: Building Good Credit

Don’t wait until you are out of debt to work on building good credit for yourself. You need to work on both simultaneously. Yes, paying down your debt and creating a positive repayment history will accomplish part of this goal. The other part, though, is proving that you can handle credit responsibly. The easiest way to do this is to open a secured line of credit with your bank.

If you are willing to work hard, you can fix your credit. It won’t happen overnight. It might take a few years—but it will happen.

By Jonny • Credit, Credit Score • 0 • Tags: , , , , , , , ,

May 6 2014

What to Do If You Have Credit Issues?

Credit issues can impact just about every aspect of your life. Why? If you do not have a good credit score, it is harder to qualify for mortgage loans, auto loans and other types of financing. In addition, a bad credit score can result in higher insurance premiums, and you may not be able to secure certain types of employment.

Fortunately, there are effective ways to deal with credit issues. Since you didn’t get into this situation in one day, you can’t repair your credit overnight. Therefore, you should not expect a better credit score after only a few days or weeks. Even so, if you take the necessary steps to get your personal finances on track, your credit score will gradually improve and you’ll be a step closer to achieving A+ credit.

Credit_Card1. Check your credit report each year

Many consumers do not check their credit reports on an annual basis. Your credit report provides a detailed account of your credit history. It includes your most recent accounts, balances, older accounts, as well as your account statuses.

When you apply for new credit, creditors review your credit report to see if you qualify for financing. But unfortunately, your credit report may not be accurate. A creditor may report information in error, or someone may steal your personal information and open accounts in your name.

Checking your credit report regularly is the best way to identify mistakes early and each consumer is entitled to one free report from each of the bureaus every 12 months.

2. Seek professional help

If you notice errors on your credit report, you can notify the reporting creditor to clear up any mistakes. In many instances, this is all it takes to improve the accuracy of your report. But sometimes, repairing serious credit report errors requires professional help.

Credit repair agencies have experience fixing mistakes on consumer credit reports. They’ll investigate a claim and work with your creditors to remove any information that’s inaccurate. Negative information on your reports can drop your credit score by several points. However, once this information is deleted from your report, your credit score will improve.

3. Understand how credit works

If you do not understand how credit works, you may not make wise credit decisions. Several factors influence your credit score, such as your payment history, the amounts you owe, the length of your credit history, the types of credit, and new accounts.

Since your payment history and the amounts you owe make up 35% and 30% of your credit score, respectively, it is important that you pay creditors on time and maintain low balances.

This is much easier to say than do. However, if you only charge what you can afford to pay, and if you pay your balances in full each month, you can improve a low credit score.

4. Get rid of your credit cards

Canceling a credit card may reduce the length of your credit history, thus lowering your credit score. Rather than get rid of credit cards, destroy your cards and only use cash. The less you use a credit card for purchases, the less debt you’ll accumulate.

In addition, do not splurge when applying for a loan. Oftentimes, consumers overspend when buying a house or car. As a result, a larger percentage of their income goes toward paying off these debts. They end up living paycheck to paycheck; and if unable to make ends meet, they might rely on a credit card. This complicates a financial situation. Therefore, know your limitations and be reasonable.

5. Establish new payment terms with your creditors

Defaulting on a credit card or loan, and then ignoring your creditors will not make the debt go away. The credit card company or bank may send your account to collections or seek a judgment. Both moves can damage your credit score, and this negative activity can stay on your report for up to seven years.

To avoid any collection accounts or legal action, always communicate with your creditors. Explain your situation and ask the creditor for a new payment arrangement. Based on your economic situation, the creditor may lower your monthly payment to an affordable amount, or temporarily suspend payments until your finances improve.

Realizing that you have credit issues might keep you awake at night. However, credit problems are not permanent. There are ways to rise above a low credit score. However, you need to be proactive and make wise credit decisions.

 

By Jonny • Credit, Credit Card Debt • 2 • Tags: , , , , , ,

Mar 28 2014

5 Reasons Credit Cards Make Financial Sense

It’s easy to vilify credit cards as a means of racking up huge amounts of debt. Whilst it’s definitely true that UK consumers are often heavily indebted to their cards, they can still be useful tools to protect your finances and manage cash flow:

They Protect Your Cash

Fraudulent transactions and identity theft are rampant in this electronic age. Using a credit card to make online transactions makes a lot of financial sense: If the website is fraudulent, or your details are stolen and used to make a transaction, you’ll almost certainly be covered for anything coming out of your account. The same thing isn’t true with a bank debit card, and certainly not any kind of money order or cash payment.

Likewise, if a company goes bankrupt before you’ve received your goods, you should be covered. As long as you quickly pay off the purchase, it makes sense to use a credit card for most online and distance purchases.

iStock_000004652423Small-280x0They’re Convenient

So long as your credit card is part of a sound financial plan, and you’ve budgeted properly, it makes sense to use it instead of carrying vast amounts of cash. If you’re faced with an ATM outage, a credit card might well be the only way of paying for goods and services. It makes sense to have one for backup if nothing else.

They’re Great For The Traveller

These days, credit cards are the number one way of carrying money to overseas destinations. The same reasons that make credit cards a safe way to pay for goods and services at home make even more sense on holiday where you can’t always be sure about the security of an ATM or the honesty of a shop owner. Credit cards also mean that you don’t have to worry about carrying vast sums of foreign currency with you either. The exchange rate is often more favourable than an exchange service at home.

They’re Good For Your Credit Rating

If you have a credit card, or even several, and always pay them back on time, it can be a good way of demonstrating your financial stability. Often, a lending company is more willing to give a loan or mortgage to an individual that has a credit history but makes timely repayments, than one with no credit history at all. Lenders keep detailed records about your credit limit as well as what you’ve repaid and when, so a clean credit card history is a great way of improving your score. Remember though: despite what you might have read in a credit cleaner review, it’s very difficult, if not impossible to remove a bad credit record, so make sure you make prompt repayments

They Come With Some Useful Extras

Credit cards often come with a useful interest free period on both balance transfers and purchases, so they can be used as an effective way of managing debt, as long as that’s part of a properly planned budget. In addition, many cards often come with some enticing bonus offers that give you things like air miles, money off vouchers and even entrance into the business class lounges of airports. Shop around, and you could save a substantial amount of money just by using your card.

Proceed With Caution

Credit cards can be a great way to not only manage your finances, but also to protect them. Just make sure your credit card use is part of a sound financial budget.

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By Harry Price

Harry Price returned to his love for writing after leaving his job as an interior designer. He is enjoying his new entrepreneur life and the freedom it gives for him to travel and move around the world.

By Jonny • Credit, Finance • 1 • Tags: , , , , , ,

Jan 20 2014

Raise Your Credit Score Fast -Add 100 Points By 18 Months!

Today let’s focus on the best ways to increase your credit score. Without wasting time lets jump right into it.

1. Improve the “Utilization Rate” on your Credit Cards and Unsecured Loans. Then continue to use your credit cards, pay them off in full each month and consistently increase your credit limits.

Your credit score will increase as you reduce the balances on your credit cards.  Your credit score is based on a number of different factors, but one of the most important aspects of your credit score is the utilization rate factor. In other words, how much of your credit limit are you using on each of your credit cards?

It is a best practice rule to use no more than 30% of your credit limit.  If you use more than 30% of your credit limit on any one of your cards, that could lower your credit score. An example would be if you had a $10,000 limit on one of your credit cards, you would want to always keep the balance on that card below $3,000.

After paying each of your credit cards off in full, now you must continue to use them, but only charge what you can afford to pay off when the bill arrives.

Don’t leave any balance on your credit cards. This will also save you money in interest!

After practicing this perfect payment pattern for 9 months straight, it is now time to ask that your creditors raise your credit limit by 20% of whatever it is now.

 

Example:

If you have a $10,000 credit limit today, after 9 months of using your cards and paying the bill off in full each month, ask that the bank increase your limit to $12,000. Your long-term goal should be to have high credit limits on all of your accounts.

2. Eliminate debt collection marks that are showing up on your credit report.

This next tip will clear 50% of your debt collection marks that are over 2 years old. So if you have more than 10 old collection marks on your credit report, this will get rid of at least 5 of them right away. A professional debt relief company can assist you with any remaining debts that you are unable to clear up on your own.

Here is how you eliminate debts or remove them from your credit report on your own.

Get your free credit report. For less than $10 you can get a membership at freecreditreport.com. Review your credit report and score there.

Anything negative on your credit report that is more than 2 years old, simply dispute. With freecreditreport.com they give you the ability to dispute marks on your own. Just go to the membership section and click on where it says “dispute center”. Select the reason that best fits your situation, in regards to why you are disputing the mark, and then click submit! Like magic, you will notice that most of the old marks that you have remaining on your credit report, disappear after disputing them.

After you dispute the mark, now the debt collection company has only 30 days to verify and validate that the debt is yours. Most of the time if you have a debt collection mark on your credit report that is more than 2 years old, the debt collection agency who owns that account, will no longer have all the documentation necessary to prove the debt is yours.

If they cannot prove that the debt is yours, then it cannot stay on your credit report, according to the Fair Credit Reporting Act.

3. Ask your mom, dad, husband, brother, friend or anyone that trusts you, to add you to their best credit card as a favor. What you will be doing is piggy backing on their perfect payment history, and this will raise your credit score fast!

Make sure that they add you as a “joint user”. This way you will be credited for their perfect payment history. Sometimes if you get added as only an authorized user, they will not report the payment history. Obviously make sure that you trust this person, and make sure that whatever card they add you to, has less than 30% of the credit limit used. This means that if they have a $10,000 credit limit, and a $5,000 balance, don’t get added to that card.

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Paul Paquin is the CEO at Golden Financial Services, a credit card debt relief company.

By Jonny • Credit, Credit Score • 0 • Tags: , , , , , , , , , , ,

Dec 16 2013

How Your Credit Score Is Determined

credit scoreLike income taxes and 401Ks, credit scores can be mysteriously difficult to understand. With the overwhelming majority of the population being affected by them, one would hope there would be a simple method for individuals and families to calculate their own scores. Of course, the same could be said for taxes and retirement plans, but we know how that story goes…

Although the specific calculations are convoluted, and typically hidden from the public, the commonly accepted and standardized scores used by lenders are made up of five primary factors listed below, in order of highest percentage of impact to lowest:

35%:  History of Payment

If there is one question lenders want answered, that question is: Will payments be made on time, and in full? Above all else, this single fact determines worthiness and reliability in lending. More than how much money is in an account, more than how much income a household makes in a year, this is the key: if a history of paying the proper amounts on time can be shown, the most important base has been covered.

Although an occasional late payment is a rather common accident amongst American families, credit scores don’t react nearly as badly to one late payment as it does consecutive or patterned late or non-payments. Do not panic if a single payment was accidentally missed; the scores looks for repetition.

30%:  Amounts Owed

This factor can be initially misleading, in that people tend to assume that the higher amount one owes, the lower their score must automatically drop. However, there is a critical difference to be made: the significant amount is the ratio of available credit that is being used. Simply put, the lower the percentage of available credit, the lower the score.

The reason creditors care more about percentages and ratios than raw amounts is that when an individual is using a large percentage of their available credit, they are considered financially over-extended, and carry a higher risk of not paying on time. Again, paying on time and in full is so important, that not only is payment history the strongest credit score factor, but the next strongest is simply trying to show lenders if people will pay on time in the future.

15%:  Length of Credit History

Another factor that is commonly misinterpreted, having a longer credit history does not necessarily translate to a higher score. If poor credit is shown over a long period of time, that will have a proportionately negative effect on a score as having good credit for the same length of time would yield a positive effect.

Yes, lenders are certainly more leery of rookie or inexperienced credit users, but a score is not automatically low just because an individual or family is new to credit. In fact, only a few months of reliable credit payments actually yield quite a high score, but to get a score to prime levels, it does require good behavior shown over a longer duration.

10%:  Types of Credit

With the wide variety of credit cards, loans, installments (monthly payments), mortgages, and other types of credit available, more is not always better. Results seem to show that the two most noteworthy conclusions to draw from this section are 1) lenders prefer users who have managed credit cards properly, to those who have not managed them at all (meaning using a card is probably worth your while), but 2) do not open a credit card or other form of credit unless you intend to use it.

Paying monthly installments, a mortgage if one is in use, and a responsible credit card is more than enough to boost this portion of the credit score.

10%:  New Credit

The myth that simply opening a line of credit will drop your credit has been exposed; this is simply not the case. However, a dangerous red flag to lenders is when a household opens up multiple forms of credit in a very short amount of time, particularly if that household is not already an established, trusted credit user. When getting started, avoid rapidly opening multiple accounts.

Written by Clif, a freelance writer for SereniCare Corporate Marketing, a Phoenix-area franchise opportunist. For further questions about credit scores, you can find more in-depth explanations at myfico.com. I hope this post was an enjoyable and worthwhile read for you.

By Jonny • Credit, Credit Score • 1 • Tags: , , , , , , , , ,

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