6 Factors That Could Affect Your Credit Score
Of course, many factors affect your credit score, as it is one of the most fragile and impressionable elements of your finances. Smallest to biggest things can influence the credit rating easily, which makes it necessary to be careful in your financial behavior.
The timely realization of the practical factors is necessary to play safely in the money world without any degrade in credit rating.
1. Payment history
It is the first thing to come into notice. The timely payments of bills and debts make a spotless payment history, which in turn breeds good credit scores. Late and delayed payments suck your ability on the affordability part that is necessary to explore and exploit financial products. It causes poor credit rating due to which you may fail to qualify for the credit card, loans, insurance products etc. Through self-discipline in personal finances, you can ensure good health of payment history.
2. Credit mix
The money world and finance companies always want to see your management of varied types of credit accounts and loans.
There are two types of credit accounts 1) Revolving and 2) Installment loans.
Revolving credit includes credit cards, lines of credit etc. while installment loans can be personal loans, mortgage, car loans etc.
A balance of both is necessary to have stable finances and a good credit score. The lenders want to see if you can handle all types of credit accounts or not. They get a good impression if you have a balanced mix of all.
Domination of any one type of credit is not suitable for the health of your credit score. Suppose if you apply for a property loan through a mortgage broker online, it will always suggest maintaining a perfect credit mix. For a smooth approval on the application, the financial front should appear flawless.
3. Credit score perusal
When you apply for a new loan, etc., the finance company performs a credit check to know your credit score and payment behavior. Usually, credit score perusal is not a harmful thing, but multiple credit checks can negatively affect credit score.
Search footprints from various finance companies in a short time can cause severe loss to your credit score. All financial advisors ask you to apply to only one finance company at a time because multiple applications create the poor rating. More footprints bring a drastic drop in credit score.
4. Length of credit history
Longer credit history is always a good sign of pecuniary stability. Multiple factors affect the credit history length and in turn credit score.
Factors that affect the length –
- Age of the oldest account
- Average age of all accounts
- Age of the newest account
Opening new accounts can affect the credit score, and if that happens frequently, it is suicidal. On the other hand, the closed accounts that stay for around 10 years on your credit report may lower the score when they finally exit. Closing an old account affects more, and a drop in rating happens.
5. Credit utilization
The pattern of credit utilization behavior always comes under the immediate scrutiny of the finance companies. Those who use the maximum credit limits are considered financially irresponsible.
While using your credit card, it is always better to not to use if up to a maximum limit. 5% to 6% utilization is considered as an idol limit. You need to maintain this level because beyond this. You only invite complications.
6. Financial association /joint financial commitments
The finances of a person who is financially connected to you through any mutual account can affect your score. If your partner has a poor credit score, you may also have a fall in credit score status.
Similarly, if your partner has a good credit rating, his/her timely payments can improve your finances. Any standard financial connection between the people leaves mutual impressions on the credit scores of both.
If you ever get into any mutual role of finances with any of your partner, friend, relative etc. keep this point in mind.
The reality is ….
That we may think that credit score is a dominating and robust factor and affects our decisions, yes, it is, but on the other hand it is quite impressionable, and even a small change in the conditions can affect it. The only trick to keep the credit score in good health is to follow self-discipline and good financial behavior in personal life. Safer you play, more durable you stay in credit score performance. Clear??
Description – Read the factors that affect your credit score. They are several in numbers and transfer a big responsibility on your shoulders to keep an eye on your financial behavior. Wrong practices may open pit holes of poor credit score.