What is in a Credit Score?

Despite what some people may have told you, your credit score affects your life in more ways than you may realize. Therefore, it is crucial you know your current score, and are always trying to stay up to date on any changes regarding it. A lower score can keep you from purchasing your dream house, spike the interest rate on credit cards, and even get you passed over for your perfect job. Knowing your score – and what goes into the calculation of it – is important in helping you build better credit.

A credit report and a credit check are not the same thing. Your credit score is a number that lets creditors know how likely you are to pay your debts. Your credit report holds all the details behind your score, as well as your current financial situation.

Many people are under the belief that checking your credit lowers your score, and therefore they neglect to check. However, this is not true. Checking your credit is an incredibly important aspect of your financial wellbeing, and should be done a few times per year at least. If others (such as a lender, or landlord) check your score, it can fluctuate a few points. So it is important not to apply for credit (or hard credit checks) unless you really need to.

credit score

Although there are many different factors that go into a credit score, here are the main five that you should always be working to improve.

1. Total Outstanding Debt

This is how much you currently owe your lenders as of right now. You should always work towards paying off your debts, and trying to live a debt-free lifestyle as much as possible.

2. Payment History

This is how often you have paid your bills on time. This is something you should always strive to do, even if it is just the minimum payment.

3. Length of Credit History

How long you have had credit plays a role. The longer you have your credit, the better this will look for you. This is why it is important to never close out old credit cards that you no longer use.

4. Credit Types

The types of credit you have in your name also plays a role in your score. If possible try to have a mixture of credit lines. Credit types can include mortgages, car loans, personal lines of credit and credit cards.

5. Credit Applications

The number of times you have applied for credit also reflects in your score. Regardless of whether you were approved or denied. It is important to not continuously apply for credit unless it’s necessary.

Follow:
Share:

1 Comment

  1. nssahkmuoe
    May 16, 2020 / 12:47 pm

    quite good for you

Leave a Reply

Your email address will not be published. Required fields are marked *