Do you think your credit history represents your worthiness to receive loans on credit? The fact is that yes, it does. As your credit score influence your finances in many essential ways, so it’s imperative to better understand its very importance and facts concerning it.
Credit score is basically a numerical expression based on a statistical analysis of a person’s credit file and summarizes historic credit information. Since the score symbolizes your worthiness of receiving loans, it represents the probability of whether one will become delinquent on a loan or credit obligation in the future.
In short, credit lenders want to make sure of your score before rendering any loan on credit. Normally, an ideal credit score ranges from 350 to 850 and the greater the score the greater the credibility. If the score falls in somewhere around 700, it is considered favorable, and with a score ranging around 600, the creditor would look to other factors to determine credit risk. The credit report is used to determine a three-digit number based on payments being paid on time, balances on accounts, amount of available credit and length of credit history.
Subsequently, there are numerous factors which influence one’s credit score and are responsible for determining it, such as:
The lump sum amount of money owed by an individual, which means that the more one owes, there is a comparatively lower credit score and less chance of receiving further loans.
Payment of bills is one such factor, which determines one’s worthiness of receiving loans as it adds up to a better score and is reflected in your credit report.
Amount of credit inquiries on your account is important as the more inquires on your account the chances of your score lowering are often greater.
Another such factor is the number of accounts one owns, as high credit balances automatically lower one’s credit score and affects credit scores directly. A moderate balance, which is paid from time to time, is ideal for getting better scores.
Credit limit is essential as it’s important to determine how close you are to your limits. Nearing the limits on your account reflects negatively on your credit score and thus decreases your essential numbers.
How long ago your credit was established helps in finding out the accurate score. If your account is long established it’ll automatically increase your score to a more positive number.
Negative credit history such as liens, foreclosures or bankruptcies will negatively affect your credit score and if your account is secure or unsecured.
It’s important to check your credit scores more often than once a year, and credit monitoring services can help you with keeping track on your credit score through alerts, so you can more easily maintain healthy credit scores.
Know your credit scores for free and track your score with credit monitoring. Get your credit score from all the 3 credit bureaus and also check with credit estimator to make big financial decisions at www.freecreditscore.com .
Article Source:
http://www.articlebiz.com/article/1051519029-1-what-determines-your-credit-score/
