The Various Factors Which Can Affect Your Credit Rating
Your credit rating is a way of assessing how much of a risk you are to potential lenders, and if you are unsure of how this works, you can get a lot of information on different finance websites on the subject. There are a lot of different factors which go into making your credit score and can have a significant effect on it, so here are some of the most important ones for your consideration.
Your Payment History
A major consideration for financial institutes when they come to assess your credit rating is what your payment history is like and have you ever defaulted on payments. If you have a long credit history and have never had any problems paying your bills, then this will go in your favour. However, if you have a chequered credit history and you have defaulted on payments, you can find that this will have an impact on your credit rating. If you’re applying for bad credit personal loans, you really have to look into that.
How Much Money Do You Owe On Credit
Another important factor which is considered and goes to making your credit score is the amount you are currently in debt. Although companies like to see a lengthy credit history with your bills always paid on time, if you stretch yourself too much financially you could end up being declined for a loan or credit card because of it. They will look at all types of credit from mortgages, credit cards, car finance and also instalment accounts.
The Length Of Your Credit History
The overall length of your credit history also plays a part in the credit rating that you receive. If you have a long history and it is marred by late payments, defaults, and other issues, this will have a bearing on your credit score. If you have a long and unblemished history, it will put you in good stead with a higher credit score meaning that you are less of a risk when financial institutes lend you money.
New Account Activity
Something else which is also checked is new account activity, so how many new credit accounts you apply for and open is also taken into consideration. It is automatically assumed that if you have opened several new credit accounts recently, then you could be a higher risk as you may be reducing your ability to pay your financial obligations. When you apply for things like a mortgage, all of your monthly expenditure is taken into consideration to make sure that you will be able to meet the payments.
Your Different Types Of Credit
Making up a small part of your overall credit score are the different types of credit that you have. These will include things such as Car Finance, Mortgage, Personal Loans, Credit Cards, Store Cards, and any other type of credit that you may have.
These are the five most important factors that are taken into account when setting your credit score and can have a significant impact on your success if you are applying for a form of credit. B careful with the amount of debt you take on and do not stretch yourself too thin. If you pay off all of your debts regularly and reduce the overall amount that you owe, you will see your credit score improve over time, but it is something that cannot be rushed.