Explaining Your Credit Score
You probably want to know the precise details in terms of calculating your credit score. It actually takes a little while to finish it and it is done by three companies and they all have their own ways to come up with the results. Thus, a credit score from one company can come out different from the other. To have an estimate on your credit score on your own, take into consideration some of these factors.
If you don’t own a credit card, don’t have any type of bill in your name, or haven’t tried borrowing money, you basically have a zero credit score. Actually, it’s not considered as a bad credit, it will just be hard for you to get a loan if you have no credit at all. However, there are some lenders willing to run the risk and let you borrow albeit without credit. But generally, it’s always better to build up credit.
You credit history will make up around 35% of your credit score, so it is very crucial. If you have unpaid bills or debt that you were not able to repay, it will be listed in your name and it will take 7 to 10 years before it gets deleted.
Every little bad decision you make will ultimately affect you credit in the long run, of course, negatively. If you are trying to make up for unpaid debts, it will still apparently appear on your credit report as bills that were paid late.
The length of your credit history makes up for 15% of your total credit score. Thus, as soon as you can, start building up credit. It will improve over time just as long as you have your bank account maintained. Essential information such as length of employment as well as residency will also fall in to this category. Therefore, it is more ideal to be stable in life than always having to move around.
Furthermore, 30% will actually be based on your current debts. Even when you’re always on time with your payments, if you have multiple loans at a time, then you run the risk of being denied more credit. So always get only the loans that you badly need and be punctual in paying as you don’t only boost your credit rating, you also get to save a significant amount of money on interests. If you do so, it will show on your credit history so you’ll be given lower interest rates on your future loans.
10% of your credit score will depend on new accounts. They will check how many types of loans you have and how many you currently have open. Remember not to open or close any account abruptly as this can be detrimental to your credit rating.
Always be cautious and educated. Knowing things like how a credit score is being calculated can help you find errors if there is any. Get your free annual credit report and review meticulously to make sure your credit score is how it is supposed to be.