Have you ever tried to buy a car, or apply for a credit card or get a mortgage? If you have done any of the three, then you know what a credit score is. Your credit score is one factor that determines whether you can get that car or get the credit limit you desire or that house. Let’s look at what your credit score means and what factors determine your credit score.
The meaning behind your credit score:
Your credit score is basically something that is a part of you. It is like an item of clothing on your body that people see. Let’s say you’re applying for a credit card. Your credit score determines whether that lender sees you as a creditworthiness person or not. If you have a high credit score the lender will determine that you will likely pay back the loan.
There are several ways to see your credit score and credit report. The first is through the three credit reporting bureaus, which include, TransUnion, Equifax and Experian. The second way is to sign up for your credit score review through your bank. Commonly, most banks will not provide this information to you for free.
What factors determine your credit score:
There are several factors that determine your credit score. The five most common ones include:
- Payment history
- Credit card utilization
- Length of credit history
- Credit types
- Recent credit
Payment history
Your payment history is a very important factor in your credit score. The more on-time payments you have in your payment history the better your credit score will look. Of course, if you miss a payment this can bring down your credit score.
Credit card utilization
If you want to increase your credit, make sure you do not do these two things when dealing with credit cards. First, make sure you don’t have too many credit cards with balance in each. This will seem like you are a risk to lenders. Second, try to use your maximum credit limit. Example, if you have a $5,000 credit card limit you want to make sure you stay below this amount and do not leave part of your balance unpaid.
Length of credit history
Some of the factors that are related to your credit history which could affect your credit score is the age of your oldest account, the age of your newest account, the average age of your accounts and whether you have used an account recently.
Credit types
Make sure to have a mixture of credit types. This means if you only have student loans trying to also get a credit card. This mixture could help your overall credit score.
Recent credit
A lot of people are unaware of credit inquiries made on your credit report. These inquiries could affect your credit score depending whether it is a soft or hard inquiry. Soft inquiries include credit card applications and some loans. Hard inquires include a home loans or any type of credit check used for a lending decision.
Credit repair services give you the path to achieve a higher credit score. At SmartLDA we review your credit report for accuracy, examine your credit history and provide tools to better your credit. We understand that each case is different and will guide you in every step of the way to achieving your financial goals!