Credit Score and the way it gets affected

Credit score should be maintained at the highest levels to enjoy the benefits offered by the lending agencies and the banks. In fact credit score has slowly moved into other areas where they affect your well being.

credit score

Before we come up with points that what affect credit score let’s get familiar with what is credit score.

A credit score is a three digit magical number given to individual by credit reporting agencies which decides that whether individual is trustworthy in giving money or not. Basically all the loans with no credit check lenders use these numbers to decide whether to lend money to borrowers or not. The credit score ranges from 300 to 850. Anyone with a score 620 and higher is considered safe for lending by the creditors. However, with the scores lower than 600 and somewhere up to 450 there is a cause of concern and one should take necessary steps to see that they rectify the discrepancies and work out ways to see that the credit scores improve at the earliest.

These numbers are used by all lenders, employers, landlords to see what is the financial condition of individual and whether he is liable of lending money or not. It is important for a person to maintain good credit score with them so that they can get qualify for loan easily without facing any difficulties. The more credit score a person will have the more easily he’ll get qualify for their personal loans for people with bad credit. Even lenders decide interest rate which has to be charged on you on the basis of these credit scores.

Credit Basics
Credit score decides your credit worthiness, credit management and financial stability. These credit score range between 300 to 850 and the higher credit score you’ll have will be better for you. These credit scores are derived by FICO method and are given by the three major credit reporting agencies which are Experian, Equifax, and TransUnion. These credit scores are given on the basis five major things which are as follows:

There are five contents of credit score which are as follows:
Payment History: Your payment history is the most important content to measure your credit score. If your payment records are not go then you may spoil your credit score to the worst condition. Usually credit reporting agencies look upon the delays of payment. The more the delay you’ll make the lower the credit score will be given to you. Your payment history is 35% part of the whole credit score given to you. These payments include your loans payments, credit card bill payments and all. It is better for you to pay all your credit card bills fully to avoid negative credit score. If you think that you will pay minimum balance toward your credit card then also your credit score will get decreased.

Using Credit: Using credit is also one of the most important content used for measuring your credit score. Your total credit balance contributes 30% in measuring your credit score. Credit is used for measuring credit score because it tell the total credit which you take every month as a revolving credit. It puts a major impact on your credit score negatively if you don’t pay to your credit card balance on time. If you pay tour credit card balance on time and use less credit then you may boost your credit score positively to a great extent. Some people thing that closing a credit card will also improve their credit card but it is wrong, closing a credit card may spoil your credit score as you will spoil your credit utilization ratio. You should always use less credit and pay credit card balance on time as to maintain good credit score.

Period of Credit History: Your credit history also shares to your credit history. That is why it is said that if you want to close a credit card account then close that account which you bought it recently, you should never close that credit account which is the oldest one as it have an old credit history which shows that you are a good customers and lenders feel safe in lending money to the person with old credit history. Old credit history shares 15% of your credit rating.

New Accounts: Opening a new credit account in spite of having already 1 credit card account spoils your credit score. Opening a new credit account means you are in need of new credit and taking more credit is harmful for your credit score. So it is suggested that you should not open a new credit account unnecessarily. A new credit account contributes 10% to your credit ratings.

Different Types of Credits used: The credit score of an individual is positively effects if you are paying toward your all dues. Paying toward all dues shows that you are concerned with all your debts and you are managing well from your income to pay toward all your dues on time. If you maintain regular flow of money toward all your dues then it will put a nice remark on your credit score and you can apply for many loans at one time in future. Paying toward all dues contribute 10% to the credit score. That is why it is said that a person should not take too much credit as then it become difficult for him to manage all his credit as income will be less and dues will be more and managing dues with his basic expenses becomes difficult for an individual.

Loans and your credit score
A lot of people are of the opinion that credit scores do not decide the loan amount they can qualify for. However, this is not true because the lenders would look at your credit score before making any lending decision. One often wonders as to why the loans of some of the people gets approved at the earliest as compared to their own which takes somewhere around 15 days. Well, this might be because those with better credit scores are granted loans at the earliest.

Repayment of the loans and how regular and diligently you have made the payments are also the factors which decide the credit score of the individuals. So, before getting into any loan commitment ensure that you have sufficient resources to take care of your repayments and you never delay or default any loans. In fact there are a lot of other financial obligations like the utility bills and the rent payments that also impact your credit score.

There are different companies which offer their services towards the maintenance of the credit score of the individuals. People do not have sufficient time to take care of their finances and when it comes to maintaining a good credit score, most of them do not have the requisite skills and time to keep a track of the same. In such a scenario, roping in these agencies which actively work on the credit repair can be a great help. However, selection of these companies should be done with great care. In fact there are a lot of companies which are fraud and take a lot of money as fees with false promises. It is therefore essential that you check for these companies on the BBB and the other government bodies which ascertain that the companies you have selected are reliable and can offer you the best of the services at affordable cost.

Conclusion: Credit score is to be maintained at any cost. There are many measures you can take to maintain a good credit score by following some basic things. If you have a good credit score then you can avail best deals from banks and on low interest rate but if you fail to manage your credit score then you will face difficulties in getting loan and if you get then you have to pay large interest amount on it.