Factors Affecting Your Credit Score

At this time of recession, resorting to accessible credits and loans is a necessity. It is, however, required to have a credit card and have the necessary qualifications in order to apply for credit cards and loans. Primarily, your credit score determines your qualification if you are eligible to apply for loan or credit. Your credit score appears in your credit report which is prepared by authorized and reliable credit bureaus.

Your credit score is certainly obtained from various factors. These factors usually have to deal with your financial capacity and your attitude towards credit. There also various formulas used but the commonly used is FICO developed by Fair Isaac Company.

According to the FICO score, the first factor that affects your credit score is your payment history. 35 percent of your credit score is taken from your payment history. Payment is taken generally. It includes all kinds of bills like electric bill, water bill, telephone bill, credit card bill, insurance and other payables. Indeed, they can access your payment history in all agencies where you have obligations to pay. Any late payment in any of your bill can affect your score. Bankruptcies also affect your credit score as it questions your financial management capability. Delinquencies greatly lowers your score and may hinder your from applying loans and credit cards.

The second factor is your debt level. 30 percent is taken from your debt level. This concerns on how you utilize your credit limits. Utilizing all your credit limit to its maximum can greatly impact your score. If your credit almost reaches its limit, the lower the score is given. In order to get a higher score in debt level, always have a balance of 30 percent of your credit limit. The lesser the better.

The third factor affecting your credit score is your credit history. 15 % is taken from your credit history. Your credit history is the record of the credit you have incurred and the period by which you have incurred credits. Through your credit history, your spending habit is traced and analyzed. Opening your accounts for a longer period is an advantage. The longer the better, because it suggests that credit institutions have trusted you and have qualified you since you began having credit.

The fourth factor, where the last 10% of your credit score is taken, is your inquiries. You add inquiry when you apply for credits. However, only applications made within a year is counted though application for credits may remain in your credit report for two years.

The last 10% of your credit score is taken from mix credits. Mix of credits is having various accounts. This will show your capability of managing mix credit which is favorable to you as regard your credit score.