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5 Factors That Can Affect Your Creditworthiness

When it comes to credit scores, many of us fail to realize the importance of this three-digit number up until the point it starts affecting your financial situation. If before, what you worry about is your GPA score, when it comes to adult stuff, it becomes your credit score.

In the real world, your credit score is what matters more than your GPA. For example, you wish to apply for a new credit card, a car or a personal loan, or even for Mortgage Loans Fort Worth, your score can make or break your application. It can also make a difference if you plan on buying insurance soon or is eying a new position or promotion. With bad credit, you can get denied of good terms, better loans and lower interest fees. If you do get approved, you can expect higher interest fees, minor perks, and higher interest rates.

This only goes to show that building and improving your credit score is becoming more important than ever. Knowing the following factors can make a big difference in how you can protect and enhance your creditworthiness.

Your Bill Payment History

The most significant factor you need to know is your payment history. It accounts for 35% of your credit score which means failure to pay your dues on schedule can take a massive toll on your score and credit report.

Even if you already have a bad credit score, paying on time can make a difference so start making this a habit. By actively paying your bills on or before the due date and by reducing debts, you can increase your score over time and build a good history of payments.

The Amount You Own Or Level Of Debt

How much you owe determines 30% of your credit score. It also refers to your credit utilization ratio which measures how much debt you have as opposed to how much is left out of your credit limit. Many financial experts advise that the best way to use your credit is to only use up to 30% of your card limit.

Having too much debt not only affects your ability to repay your debt but your credit score as well. Aim to use just up to 30% and lower to get a higher score in the future.

Length Of Credit History

Did you know that even the age of your credit can affect your score? This amounts to 15% of your total credit score.

It would be best to keep your old accounts open as this shows you already have lots of experience when it comes to credit. You may not have the best credits in the past, but by slowly improving your credit score, you can soon build a better one by not owing much and paying your bills on time.

New Lines Of Credit

Opening new credit accounts for 10% of your total score. Lenders make a hard pull whenever you apply for a loan. It causes a temporary decline on your credit score to determine how much of a credit risk you are.

Credit Types In Use

The last 10% accounts for the types of credit you use - be it a mortgage, credit cards, car loans, etc. The FICO formula will consider all credit types when determining your credit score.

Make sure to consider these things before making any financial decisions. Build a better credit history and use credit responsibly and you'll soon achieve a better credit score to help you with your future financial endeavors.

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