Understand Factor of Your Credit Score

by Roby Pagong

Credit scores are very important. We all know that, because it is where the approval of our loan application depends. It also affects the amount of money we are going to get as well as the terms of the loan. Credit scores are essential because this is the basis of the lenders. It tells them how risky it is to lend money to someone. This is the reason why we need to take care of our scores. We have to know the factors affecting it so that we will know how to make it better.

The credit bureaus play a significant part in determining your credit score. They consider the information gathered to do that. There are various factors to consider. The three recognized credit bureaus in the country have different computations. However, they are very similar. They base their computation on what the creditors submit to them. This information will dictate if your score will be higher or lower.

Below are some of the most common factors that affect your credit score:

1. Your payment history is first on the list. After all, lenders would want to lend money to someone who remembers his dues. Here, your payment behavior will matter. If you are always on time with your payment, then you will most likely have a high credit score. However, if you miss your payments all the time, your credit scores will not be as good. The number of times you have missed payments will be recorded as well as the amount involved.
2. The current liabilities you have will also be considered. Even if you are current with all your obligations, your c will still be measured. You may be able to pay all debts at the moment, but what happens if an additional loan is added to your obligations? Will you still be able to pay all the lenders? If you want better credit scores, settle some of your current debts first before applying for a new one.
3. The length of having had credit is also an important factor. This is because information is critical in determining your credit score. If you only had credit for a while, the information would not be enough to establish it. Most of those who get higher score have credits for a longer period.
4. Your stability also matters to the lenders. If you are stable, it means that the risk of lending you a certain amount is lower. This is based on your employment status, your salary as well as the length of period you have been with the company. They can also base it on your address. If you have been staying in the same address for more than three years, then you are deemed stable.
5. The credits you have will also influence your score. You can have revolving credit and installment credit. An example of a revolving credit is the credit card. For installment credit, we have car loans and mortgages. If you have both types of credit, your score is higher. This is because it shows that lenders trust you.

Knowing the factors affecting your credit scores is important because this will help you improve your credit scores.