Factors of a Credit Score

There are five basic factors that affect the scary credit score which identifies your acceptance or rejection for all loans or credit cards, and firmly changes the interest rates or the entire cost for you to borrow the funds.

As you go through this article you will read the primary overview of the most essential factors in knowing your credit or loan score. In every application you make, bear in mind that they play a big role in allowing the person to borrow or not. Here are essential factors and an estimate in the credit score.

Your payment history gets about 35 percent of it; this will change depending on the scoring agency. Obviously this is the major factor since a person with a record of a good payer is a safe person to lend money to. Lending institutions can somehow be assured if you are noted for paying your dues promptly.

If ever you have negative tracks on your credit score, there are points that will identify the amount of deduction to your credit score, first is the time since that incident occurred.

If it happened a long time ago and after that you are consistent with paying your dues on time, then that will not affect your score very much. However, if such event happened just few weeks ago, then expect for a major impact for that.

Another point is the number of missed payments which can greatly affect your evaluation. One missed payment in ten years of good credit history will not matter that much, but the more missed payments in your record, the higher your risk of getting a lower debt score. And lastly, how bad was the mistake of being late in paying your dues on one of your credit card.

On the other hand, the amount of your latest credit is another factor which carries a certain percentage of your credit score.

This includes your credit cards, car loans, home mortgage loans and other financial liabilities. Lending companies will know how you handle your credit limit if you are using it up to its maximum capacity or not. To give you a good effect on your score, you just have to pay your loans to lessen the percentage of your outstanding credit.

The time on how long you have had credit is a factor that can bear almost 15% of your credit score. This is due to the fact that time is a lot easier to establish patterns of behavior.

Even though you are a good payer but you only have a credit card for a short period of time and never had long-term loans lending companies will still have doubts on your financial ability. This is because you have not faced any of the crucial incidents of having major financial responsibility.

The last application for credit is also a factor on your credit score. Your latest credit application can put an impression that you need some sort of financial assistance or money. And lack of money can give a negative impact on your score. There are cases where lenders check your credit score which can give you a negative impact on it. Thus it is wise not to allow lenders or banks to get your credit score unless you are indeed looking for loan.

The last percentage of the credit score goes to the types of credit you are using. There are two types of credit, revolving and installment. The former includes credit cards and other related items wherein even if you pay them in full, you still retain the credit to avail it again, while the latter consists of car loans and mortgages. Normally, individuals who have various credit sources get a higher score.