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Things that can alter your credit scores

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By: Amy
on 7th Nov,2013

Have you ever wondered what affects your credit score? Many people do.
Things that can alter your credit scores


Have you ever wondered what affects your credit score? Many people do. Interestingly, a variety of factors are taken into account when determining your overall score, including your overall payment history, credit history length, level of debt, and a few others. By having a better understanding of what factors will be used to determine your score, you can take the necessary steps to increase it.

Overall Payment History


When it comes to things that influence your credit score, your payment history makes up over one third of your score. If you are consistent with paying all of your bills on time, you will be rewarded by doing well within this category. However, if your history shows that you pay your bills late or miss them altogether, this can cause major damage to your credit score.


If you’ve missed a payment or you’ve been late on a payment in the past, the best way to help your credit history is to do what you can to get and stay current on your payments. The longer your credit history reflects that you pay on time, the less impact your late payments will have on your credit score.

Length of Your Credit History


The length of time that you’ve had credit can account for up to 15% of your overall credit score. This factor examines your history of having open credit accounts and how well you have been able to manage them over time. Therefore, the longer you have had credit and have been able to manage it appropriately, the better it will be for your credit score.


Unfortunately, recently opened or new accounts will not result in credit score changes. The only way that you can build your score within this category is to give your accounts some time. Your recently opened accounts will need to age before you are able to see a positive affect from the account history reflected on your credit score.

Debt


Do you have a lot of debt? If so, you should review your credit rating. Debt will account for about 30% of your overall credit score, so this factor is almost as great as your overall payment history. While some debt is good, too much can hurt you, especially if you become overwhelmed to the point where you are not able to pay it off.


When you check your credit rating, you should also examine your credit history to determine if you have any issues on your report that might lead to a high credit risk. Negative traits can include credit cards that are maxed out, high balances, and too many open accounts with outstanding balances.

Mix of Credit


The variety of credit accounts that you have also plays a factor in determining your credit score, and this can include auto loans, home mortgages, and credit cards. It is important that you have a healthy mix of these credit types in your credit history, as having too much of one type can hurt you. Diversity is important when it comes to your credit score.

New Credit


The frequency with which you apply for new credit accounts will also play a major factor in your credit score. Each time you apply for new credit, an inquiry will be posted to your report that shows you are currently searching for credit. This can be detrimental to your score, especially if you have too many inquiries on your report within a short period of time. These inquiries will temporarily reduce your credit score, and by law they must stay on your credit report for two years. However, only inquiries that have occurred within the past year will be counted when calculating your overall credit score.


By understanding the factors that can alter your credit score, you can use this information to maximize your own score. By taking control of your credit report and credit score, you can provide yourself with greater financial opportunities in the future. A higher credit score will make it easier to secure an auto loan, credit card, home mortgage, and other financing.

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