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Factors affect credit score

5 Weighted Factors That Affect Your Credit Score

Your credit score plays a significant role in your loan approval process. Therefore, it is essential to know the intricate details about your credit score and how you can improve it. But first, make sure to learn more about the factors that affect your credit score. Why? If you manage to identify the factors that can affect your credit score, you surely can increase the score without much effort.

In case the entire topic is entirely new to you, do not worry. The blog will help you know every little detail about these factors and credit scores for your reference. Even if you are not planning to get any loans soon, you need to know these facts to determine your worth in the investment industry. Confused much? Hold on, as this blog aims to educate you both about credit score and their impact on your financials.

About Credit Score

A credit score refers to a number that the lenders use to determine the worth and risk of lending money to an individual. Mortgage bankers, credit card companies, and auto dealers are the three types of lenders available in the market. These people like to keep a close tab on the borrower’s credit score and thereby determine the rate of interest for the loans. 

You need to look for credit score repair services to fix it before getting any money lenders in case of a bad score. Also, the insurance companies and even the landlords like to refer to your credit score to know more about the person’s financial condition before issuing any policy or providing a space for living. 

A credit score refers to the numeral that can range from 300 to 850. It is responsible for depicting the creditworthiness of any consumer. The higher the score is for the borrower, the better the chances are for borrowing money from the potential lenders. The credit score tends to depend on the individual’s credit history and his/her number of active accounts, debts, and repayment history. These are some of the crucial factors that affect your credit score.

Fair Isaac Corporation, which is widely popular as FICO, is responsible for designing the credit score model. The model is a highly successful one, and hence many top-rated and leading financial institutions use them. If you are interested in knowing more about your credit score and how to improve it, you might want to consider understanding the FICO model for reference. And if you are concerned about the factors that influence your credit score, keep reading this blog.

Top Factors That Influence Credit Score

A lot of factors are responsible for increasing or decreasing your credit score. Your repayment history, open and active bank accounts, and multiple other factors seem to be quite essential for determining your credit score. That is because your credit score depicts your financial stability and responsibility to the money lenders available in the market. And the FICO score can be the determining factor for your loan and its rate of interest. Among the different factors, the vital factors that affect your credit score are:

  1. Payment History

The first question that arises in any lenders’ mind is whether you would pay the loan back or not. And that is the biggest fear that every person goes through when they lend their resources to unknown people in the market. And that is the reason why your credit history and score are crucial for every money lender. 

The lender would be interested in knowing your past financial history to determine your worthiness for a loan. And hence, your repayment history happens to play a significant role in determining your credit score in the market. 

If you are always paying your debts right on time, you will likely have a decent credit score. But in case of failures or being late can have adverse effects on your score. Hence, if you aim to increase your score quickly, you need to start paying your loans and other bills right on time. In case you want to fix the score immediately, find the credit score repair services available around you. 

  1. New Credit

You have to worry about your old accounts but also need to focus on the new ones. The FICO score also considers every little detail of your new accounts for determining the credit score. It checks whether you have opened or applied for any new accounts along with the previous account opening history. 

Have you heard about hard pulls? Well, if you haven’t, then know that lenders tend to use this as a method to understand more about your background before lending money. It refers to checking out the credit information of the borrower to determine the worthiness of the same property. 

These hard pulls can cause many difficulties as well. They can even bring about a temporary decline in your credit score. How? Well, if you have opened multiple accounts in recent times, you can be at greater risk. However, the risk is applied only when the percentage of these newly opened accounts would be higher than the total number. Why is this one vital? That is because it shows that the borrowers might have been slow in paying the previous loans or are planning to take up a few more for his/ her benefit. 

  1. Previous Loans and Amount Owed

So, you have been making all your payments right on time. But what if you are reaching a breaking point? Did you know that the FICO score also considers your credit utilisation ratio? It measures the amount of debt you have compared to the available credit limits. So, your previous loans and the amount you owe to the other lenders seem to play significant roles in determining your credit limit as well as the score.

Sometimes, you might be getting an advantage if you have borrowed some money in the past. That is because it gives the lenders a clear idea about your repayment history and your responsibility. And so, if you aim to improve your credit score, try determining the exact amount that you owe to your past money lenders. And in case you have difficulty tracking such information, you can find reliable credit scoring software to manage these loans and accounts responsibly.

  1. Length of Your Credit History

The next point that requires your attention has to be the tenure of your previous credits. How long have you been paying or using your credit card for your transactions? How many years did you take to repay your entire loan? How old is the oldest account, and what is the mean age of all your active accounts?

These are some of the essential questions that are vital for determining a good credit score. And if you have always been thinking of skipping your credit history, you need to think again. Many people tend to avoid loans or using credit cards, worrying about the negative impact of the length of their credit history on their score. 

But the truth is slightly different from this aspect. Instead, your long credit history can be quite profitable for your score, provided that you have made the repayments on time. You need to be quite sensible and responsible about paying these debts within their strict time frame. And if you manage to do so without any troubles, you can improve your credit score without any worries.

  1. Types of Credit in Use

Finally, as the list comes down to a wrap, know how the FICO formula considers every credit in use. It tends to depend on your store accounts, mortgages, instalment loans, and many more such aspects. 

Sometimes, you might feel like overlooking these aspects, but remember that these little points play essential factors in determining your future score. If you want to improve the credit score, you need to find an expert as soon as possible.

The expert is a professional who is trained to deal with such low credit scores. They are also responsible for devising the right plan to help their clients achieve the perfect credit score for their future endeavours. 

Final Thoughts

If you have closely referred to every factor discussed above, you know what determines your credit score and how influential they can get overtime. Now you are well aware of the crucial factors that can increase or decrease your credit score, thereby affecting your future investments. And if you are too concerned about improving the score without any hassles, you need to check out the services of Credit Triangle.

You might have come across many brands claiming to be quite effective in increasing the credit score instantly. But it isn’t always true for every brand. Instead, you might come across many such companies that fail to fulfil their promises within a strict deadline. But it isn’t the same with Credit Triangle. The company is known for its hassle-free, reliable and easy solutions to fix your credit scores and financial problems. It can help you improve your credit score by identifying the crucial factors and developing plans to act on them. In case of any queries, the company is always happy to offer you professional services at affordable prices in the market. Do you wish to explore more about the Credit Triangle? Contact today!