In this article we will consider two important factors that affect your credit score.
1. Regular payments on the loan (35%).
Regularity and accuracy of scheduled repayment of the credit – is the most crucial factor that determines nearly 1 / 3 of the credit score. Banks start from a logical assumption that a person not missing payments on the credit for many years will continue to hold to the same practice – so, they give a credit safely to such a person.
If your credit report has negative marks, they will reduce your score. How much? It depends on how long it took for you to pay the money back, how many times such delays occurred, and how difficult it was to get money from you.
One missed payment many years ago will not have a noticeable impact on your score, but if you delayed payouts several times last year – it’s a bad sign for the company. If you lost sight of the date of monthly payment once and one call from a bank employee was sufficient for you to meet your obligations – this will not influence on your score. If the bank had to take special measures for searching, transfer the debt to the collection agency or apply to court – a borrower’s credit score will fall very much. Never delay your credit payments.
2. The present total size of the arrears (30%).
The second most important factor affecting the credit score – is the size of you current debt. Try to calculate how much money you can borrow – for a car, an apartment, for urgent needs, and so on, and then divide your current debt into this amount: you will get a ratio that indicates how close you are to your “credit ceiling”.
For comparison, most Americans use less than 30% of available credit resources, and only about 12% use more than 80% of possible loans. The closer your total liability to a reasonable maximum is the most likely it is that the lenders are less willing to borrow money to you.
Resist the temptation to take a favorable credit without pressing need, and try to repay those debts that you can. Always correspond the overall size of your debt to your income.
Not very long ago loans were affordable to many people and they didn’t miss this chance. To be on the safe side they have to check their credit reports. This is very useful task but it may seem hard for somebody. It is possible to use credit monitoring service – they will help you to understand the reports clearly.