By Joy Mali
On November 21, 2011
Do you have a mortgage or a loan? Those companies have checked your three digit number or credit score, which is a foundation to lending you money or not. This score portrays your behavior, which a creditor understands before considering you as a reliable borrower.
What contributes to your credit score?
A credit report signifies the credit worthiness of an individual; it incorporates certain details which are used in the calculation of the credit score. A regular credit check is desired so that one can manage his or her own report well. Also understanding about credit scores will make you more aware of the direction one should take.
Know the major factors that contribute to your credit score being good, average or bad:
- Make sure you pay bills or fines on time to the creditors who submit information to the agencies because 35 percent of your credit score is determined through payment history. Even unpaid library fines, medical bills or parking tickets may lower the score.
- Amounts owed by you, the creditor, integrate up to 30 percent. This is also compared with the total available to you or the amount of the loan borrowed by you. Your credit score may suffer if you exceed your credit limit.
- Your few and old accounts with timely payments can contribute in a healthy way. 15 percent of the score depends on the length of your credit history. Also your duration as well as the last activity on your account is noticed while
calculating the scores. It is suggested that you not close your old accounts (along with timely payments) for a healthy contribution towards your credit report.
- Your recently opened accounts compared to the total number of your opened accounts contribute to 10 percent of your score. In addition, your credit report also displays the number of recent inquiries which also forms the basis for calculating scores. A decline in score is noticed when an individual looks for new sources for credit. This sends out messages in the mind of creditors that you are in some kind of financial turmoil. So be selective when you have to opt for an auto loan or mortgage because with every inquiry creditors can degrade their scores.
- The rest is contributed by the type of credit used. 10 percent of the score is calculated after looking at individuals’ borrowed credit. For instance, with debt for which you have fixed installments every month it signifies that you have to take out a big amount routinely; mortgages can be cited in this case. And with this it can be estimated how individuals will carry other debts like credit cards.
This information can help you become more informed about the management of credit scores . Through regular credit checks, you can get a grip on your declining financial conditions.
Know your credit score for free and track your score with credit monitoring. Get your credit score from the three credit bureaus and also check with a credit estimator to make big financial decisions at www.freecreditscore.com .