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.


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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