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Understanding How Your Credit Score Works

Understanding How Your Credit Score Works

Everyone should have a solid understanding of how their credit score works. To most people this is just a number, but there is a lot more behind it that you should be aware of. The more you know about how this number is decided, the easier it will be to improve your credit as a whole. In this article we will go over some of the more important factors that impact your score. If you are planning on getting a short term loan in the near future, this information can be of great use.

Your Payment History

Your overall payment history makes up about thirty-five percent of your entire credit score, so it is important to say the least. Whenever you are late on paying a loan payment or bill, your credit will suffer as a result. This is precisely why it is so crucial that you make prompt payments on a regular basis. When lenders see lots of late payments on your credit report, you will be less likely to get approved for that loan you need.

Credit Utilization

The amount of credit that you utilize is something else that plays an important role in your overall score. You should try to stay right in the middle in terms of how much of your available credit you use. It’s not a good idea to use too much or too little because of the potential consequences to your credit. Your credit utilization makes up a big percentage of your score, so it too is very important. It is a good idea to keep yours around 30%, especially if you are trying to raise your credit score as quickly as possible.

Length of Your Credit History

The length of your credit history also matters quite a bit when it comes to getting a loan, credit card, or even an apartment. When someone runs your credit, they like to see a lengthy history. Lack of credit can definitely work against you, which is why it’s so important for young people to work on building theirs early on.

Diversification

If you want to strengthen your credit as a whole, having multiple credit cards can definitely be a good thing. You don’t need to have a ton, but a few different ones can really help with boosting your score in a noticeable way. Those who have different types of credit on their report often have an easier time obtaining a loan, so you need to keep that in mind. It is very important for you to ensure that your report is adequately diverse.

Getting a Loan

Simply obtaining a loan definitely has an impact on your credit score. Submitting a single application puts a small but negative mark on your credit report. This is why you should refrain from submitting a lot of applications within a short period of time. The more applications you submit, the faster your score is going to fall.

One of the best things you can do to improve your credit is to pay off your loans on time. This looks great on a credit report, and it will instil confidence in future lenders that you apply to. Make sure that you only take out loans if you are sure you can pay them back on time. Your credit can be easily ruined by defaulting on just one loan. Even paying back your loan late past the due date can do a lot of damage to your score.

 The fact is that it is certainly possible to get a loan despite having bad credit. There are plenty of lenders that can work with you in this situation. Look for private lenders, as they tend to be the most flexible. There are a lot of bad credit or no credit loans that you can get fairly easily.

Different Credit Scores

You need to keep in mind that no person has just one credit score, and it is changing all the time. The fact is that you have a different score with each credit reference agency. This is why it is so important to get this information from all three major agencies when you are checking your own credit. A person’s credit score fluctuates on a regular basis because of many different factors, so it’s nothing to be alarmed by.

Understanding your credit score is essential if you ever want to borrow money from a lender, rent an apartment or get a new credit card. This number affects many different aspects of your life, whether or not you realize it. The more you learn about how this works, the better of a position you will be in to take charge of your finances. Everyone with a credit history has a score, and you should really know what yours is.

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6 Essential Steps for Building Your Credit Fast

6 Essential Steps for Building Your Credit Fast

When you are trying to build your credit, there are certain steps you can take that can be incredibly effective. The more efficiently you build up your score, the easier your life will be. If you want to get the best deals on loans, you will have to take the time to do these things. In this article we will cover some of the very best ways to boost your score as quickly as possible. The last thing you want to do is go through life with bad credit.

  1. Obtain Copies Of Your Credit Reports

Make sure that you obtain a copy of your credit report from each of the three major credit reference agencies—TransUnion, Equifax, and Experian. This will provide you with a full and clear accounting of your credit. You won’t be able to make any noticeable improvements until you get this information first. Take the time to look it over very carefully so that you don’t miss any potential errors. You don’t want to leave any mistakes on your credit report, as it could hurt your score. If you find any errors and get them removed, your score will likely go up in a noticeable way.

  • Always Pay Your Bills on Time

The importance of being on time with your bills cannot be overstated. You need to always make an effort to take care of your bills by the due date, because otherwise your credit is going to suffer. Make sure that you keep track of when all of your bills are due so you don’t miss any payments. It is a good idea to set up automatic payment for as many of your bills as possible. This will eliminate the chances of forgetting to pay on time.

  • Practice Proper Credit Utilization

A lot of people think that it’s a good idea to utilize as much of their credit as possible, but nothing could be further from the truth. The fact is that you should actually keep your credit utilization at around 30%. This will help to mitigate the negative impact on your credit, and it can actually help you improve it.

Proper credit utilization is a crucial aspect of maintaining a healthy credit score. You will need to make a point of paying down all of your outstanding balances so they remain low. It could be necessary to get your credit card provider to increase your limit, but not necessarily.

  • Don’t Close Out Your Old Credit Cards

Another big mistake that people make with their credit is to close out old cards. It is usually not a good idea to do this because of the negative consequences to your credit as a whole. Every time you close a credit account, you will get a negative mark on your report. Make sure that you allow all of your old cards to remain open. This can help you avoid unnecessary damage to your credit that you will definitely end up regretting.

  • Make Paying Off Your Debt a Priority

You absolutely need to make paying off your debt a top priority, because otherwise you will never manage to truly improve your credit in any real way. This means paying as much as possible on your cards every single month. You don’t want to simply pay the minimum amount, because you will never get anywhere. The more you pay each time, the better your chances will be of seeing a marked improvement with your credit.

  • Consolidate

A lot of people should at least look into consolidating their debt. This is basically when you combine all of the different debt you owe into one amount that you pay off each month. The biggest potential benefit of this is that you will have a lower overall amount to pay. If you can manage to get a decent interest rate on a debt consolidation loan, it is definitely worth it. You might also want to think about taking care of the debt you have with a credit card that comes with a zero percent introductory rate. Keep in mind that this rate only lasts for a certain amount of time. You will need to pay off your debt before the interest rate kicks in.

If you want to make getting the best deals on loans as easy as possible, you will have to work on improving your credit. There are lots of different ways to do this, and we have laid out some of the best ones. The more committed you are to doing this, the more success you are going to have. A solid credit score and history can really help you out with getting low interest rates on different loans that you’ll need throughout your life.

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