Friday, May 29, 2009

A few factors affecting your credit score

Your FICO score mainly depends on the following factors. If all these factors are handled wisely, you can get a good credit score. Here are the factors affecting your credit score.

1. Your financial Records – Payment records are the most significant aspect affecting your credit score and contribute to about 35% of your credit score. It shows your regularity with your payments. Timely payments go down as a big positive in your credit report. You might even witness a hike in the credit score if you pay the bills before the due date..
Delinquent or “charged-off” accounts affect your credit score to the maximum. It is best to pay them off as soon as possible. The stigmas might still stay on your credit report even if you have paid them off. However creditors take your application into consideration if you have tried to repair your credit by paying the entire pending amount off.

2. Outstanding Debt – Outstanding debs makes up for 30% of your credit score. This is the amount you owe to your creditors to your credit limit. Experts recommend that you keep the credit utilization under 35-50% of the total limit. A low credit utilization rate helps improving your credit score.

3. The length of your Credit History - This constitutes 15% of your credit score. A long credit history has a fantastic affect on your credit score. If you have a number of credit cards, you might as well consider closing the recent ones rather than the old ones. You can, in stead adjoin as an authorized with a relative or a family member to one of their old credit accounts. This helps boosting your credit score.

4. Type of Credit Account – Almost 10% of your credit score depends on the kind of accounts you use. Unsecured credit accounts do no good to your credit score. On the other hand a good mix of various kinds of credit accounts is a big advantage and helps improving your credit score.

5. New Credit Accounts – Do not apply for a new credit card if you don’t need it. A request for a credit card may prompt a hard inquiry from the creditor. Even a single hard inquiry slashes your score by 2 to 50 points, which further remains on your credit report for a period of 2 years. Hence, applying for many new credit cards within a short span of time is a big ‘No’.

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