Calculating credit scores can tell you whats going on
Your credit score is very important if you live in the US. Having a good credit score can open many doors and help you reach your goals but having a bad score can slam the doors in your face and leave you unable to reach those goals. When a lender is deciding whether to lend you money they will want to know how much risk is involved and will rely on your credit score to determine that risk factor. So what factors help in calculating credit scores?
1. Your payment history. The biggest factor in determining a credit score, with a 35% count, is the record of your payments made to all your creditors. Even some late payments when paying bills or your mortgage can put a serious dent in your credit score. Missed payments will make an even bigger dent and any bad scores will remain on your credit report for seven years and there is usually no exception to that rule. Even once you have paid off the particular debts in questions, the bad marks will still remain on your report until that 7 year period is over.
2. Credit card usage ration. The credit card usage ratio makes up 30% of the credit score and this will compare the amount of credit that you have available to use, to the amount that you are using. If you are not using all the credit available on your credit card for example, your score will be higher. If you pay off your credit card or a loan and then close it, that won't actually help your credit score too much, it is best to pay off your credit card and then leave the account open but don't use it. Because you have all that credit available but are not using it then this has a very positive effect on your credit score.
3. Length of credit history. The longer that you have a good credit rating the better and the length of time you have been using credit counts for around 15% of the total score. The reason the length of credit history is important is so a lender can view someone with a long credit history, even though they may have a few marks against them, less risky than someone with a short credit history, even if a perfect one. It is only over time that one can get a complete and accurate credit risk. This is why if you have children it is important to teach them young about credit scores and have them begin making their credit history early and carefully.
4. Variety of credit. Around 10% of the credit score is counted by variety. If you have a number of different types of credit, such as car loan, credit cards and mortgage, and are managing them all well then this is seen very favorably in relation to your credit score.
5. Stability. This point takes into consideration such things as your job and how long you have had it, your current address and how long you have lived there. If you have had multiple jobs and they don't last long, or if you have lived at your current address for less than three years, then these are viewed as being less stable.
These are the factors that are used to calculate credit scores. By knowing these factors and understanding them then you can take action to increase your credit score and enjoy the benefits a higher score will bring.
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Article Source: Messaggiamo.Com
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