February 19, 2018

What Impacts Your Credit Score?

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Keeping up to date with your credit score is of paramount importance. Your credit rating will impact many different things in your life, including your ability to get a mortgage and secure better deals on credit cards. Not only is it important to know what your credit score is, but it is vital to know what impacts it so that you can maintain and improve your rating. So, let’s take a look at the different elements that have an impact…

The average age of your credit accounts – If you pay off a credit card, it is not always the best idea to close the account. This is because it will reduce the average age of your credit accounts, which can actually have a negative impact on your score. In most cases, if your credit accounts have an average age of 33 months or more, this will have a positive impact on your score.

Making credit applications – A lot of people make the mistake of making numerous credit applications or loan applications simply to see whether they would be accepted or not. They are trying their luck, so to speak. However, this is going to have a negative impact on your account. When looking for credit cards or personal loans near me online, you should determine your eligibility before you apply. Soft searches do not have an impact, but hard searches do, and they will stay on your account for six months.

Whether you make your payments on-time – You are probably already aware that this is a factor, but as it is so important, it needs to be mentioned. If you miss a payment, it can stay on your account for six months, and severely impact your ability to borrow money. It is, therefore, of critical importance that you make all payments on time.

How much of your available credit you are using – The amount of credit you have available to you doesn’t matter as much as how much of your credit you are using. For example, if you have £1,000 available to you, and you are using £995, this is going to look worse than someone who is using £1,000 of £4,000 that is available to them. This is because the former looks like you are completely relying on credit. The best thing to do would be to either pay off some of your debt or to simply ask for your credit limit to be increased.

How much credit is available to you – The more money you have been offered by your credit card company, the better this is for your score because it shows that other lenders have trusted you enough to offer you a larger amount.

As you can see, there are a number of different factors that come into play when determining what your credit rating is. It is, therefore, important to stay on top of the elements that have been mentioned above so that you can maintain your score. After all, the last thing you want to do is hurt your credit rating without even realising it.

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