Your credit score is a number based upon your credit report. As you grow in
life you will find that it is one of the most important number affecting life
and finances. The higher the credit score, the better it is. A higher score can
help you find loans with low interest rates and quick turnaround times for
approval. The more you understand your credit score and the factors that
affect your credit score the easier it will be for you to keep your financial
health in order. The following 5 critical factors affect your credit score
in a major way. By knowing these you can keep a check on them and make your
credit score a healthy one.
1. Re-payment history
This factor carries the highest weight in your credit report. How steadfast
are you in repaying your loans, makes your credit report shine. Experts claim
that this factor alone accounts for 35% of points in your credit score. So, if
you falter on repayment front it is sure to be reflected poorly on your credit
2. Outstanding debt
The next comes your debt burden. How much you owe is a factor that according
to experts carries about 30% weight in your credit score. This is
30% is based upon outstanding debt. To get a better score it is
advised that you keep your outstanding debt to a minimum.
3. Length of your established credit history
The time for which you have a credit history also matters. The longer your
established credit history the more credit reporting agencies believe in you.
This could be simply because of the fact that they have more data to analyze
your financial position. Experts give it a 15% weight in determining your credit
4. The state of your financial accounts
How much money do
you have in your bank account, your income levels, your house, car, your assets
etc. comes the next. A healthy bank account reflects a healthy credit score.
Experts find that credit reporting agencies give this factor 10% weight while
determining your credit score.
5. Different credit types you have
Whether you have taken a
secured loan, unsecured loan or applied for a debt consolidation matters. The
loan or credit types also reflects on your credit score. Credit rating agencies
give it a 10 % weight to determine your credit score.
credit scores is quite confusing and very complex. Exact method of calculation
is seldom explained by credit reporting agencies. The 5 critical factors
mentioned above, give you the nearest estimate and will help in keeping your
credit reports in a good shape.