Ever wondered how reporting agencies calculate your credit score? Well it’s no rocket science. A credit report is merely a picture of how financially responsible you are. It contains data that shows how you pay off your debts based on what you’ve done in the past. In fact, from this report, you can actually tell your borrowing activity and repayment history.
Your credit score on the other hand is a number that indicates how likely you are to pay off your debt. Before you even seek different forms of debt relief Innisfil, understand how your credit score is determined. The score is determined by the information that is on your report. This score can change frequently and is interpreted differently by lenders. The score can be as low as 300 and as high as 900 depending on the company that gives the report. Let’s look at some specific factors that will determine your credit score.
Will you be able to pay back the money owed on time? The only way creditors can determine this is by looking at your credit score. Whenever you make a payment on a credit card, lines of credit or any other loans, it reflects on your report. The report simply indicates whether or not you have paid as agreed. If you have any missed or late payments, this will have a negative impact on your score. Payment history carries 35% weight in your credit rating.
Whenever you want to borrow money, the creditor will be interested in knowing how much you already owe. If you are able to make monthly payments as agreed, then you may qualify for additional credit. If you use more than 75% of your credit limit on credit cards, it will have a negative impact on your score. It shows that you may struggle to keep up with payments if you owe creditors more than 75% of what is available to you.
Your credit score will also be determined by how you have used the credit that is available to you overtime. If you have not used credit for a long time, it is difficult for a creditor to determine whether or not you are financially responsible. It is always advisable to use credit minimally over the years. Remember that information is usually deleted from your report after 6 to 7 years.
New credit inquiries can also have a 10% impact on your credit score. This is because credit shopping is considered a sign that someone is unable to manage their finances hence keeps looking for the nearest credit to qualify for. Refrain from making new credit applications every other time.
If you have different forms of credit on your report, it shows how you can handle your money overall. If you have taken debt consolidation Innisfil before, it could show that you have had a problem paying debts in the past. This can affect your score negatively as well.